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American Capital, Ltd. Message Board

  • yando1946 yando1946 Oct 18, 2004 11:18 AM Flag

    Let's try civility

    I have for me what is real money in ACAS--$15k bought at just over $28. I bought it for the dividend and can live with some up and down in a reasonable range since I am dripping in an IRA with ACAS. Consequently there are no immediate tax consequences on the divy. when it goes down and the dividend purchases I feel good about the discount and when the share value goes up I feel good with how it looks in my portfolio. Around 5 years from now the share value price will become a lot more important to me. If it shold drop down to $28ish I will be tempted to buy a bit more, in the meantime holding and collecting is just fine.

    I am reading this thread with the hope of garnering real information. It is disturbing that this thread has degenerated into so much name calling. Can we all try being just a bit more civil and stay on topic with real content. Thanks.

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    • Vando,

      If you hang around this board long enough you will find out that ChazfakeCpa and a whole bunch of others regularly try to smear ACAS.
      As one of the longs who has buying regularly since ACAS was in the $17 buck range I am at a double already colleecting good dividends along the way.
      But Chazfakecpa and his cohorts can get under peoples skin sometimes and they lash back.
      As for me I look at it as a time to buy again. Everytime Fakecpa shows up, I have bought more. And it has paid handsomely.

    • The market says it is risky because they invest in companies that are mostly privately held. You can't see their balance sheet or their income statement. Their valuation is established by outside experts as well as in-house staff.

      Judge their performance by Net Investment Income and net cap gains.

      ACAS differs from a bank in that they get to realize cap gains and substantial fee income. With a bank, it is all interest. Both have their winners and turkeys.

    • Why do you perceive that the market considers it risky, because Treasuries pay a paltry 4%? There is the risk that the world will end. You need to do much research on the business model.

    • << they invest in companies that are mostly privately held. You can't see their balance sheet or their income statement. >>

      That makes sense.

      <<it's the equivalent of buying junk bonds on margin. >>

      I don't see that. That would only be true if I knew their companies were on the ropes. Looking at their company portfolio, it appears most of them are pretty solid. We don't know for sure because of the above.

      << it has to keep selling more shares to raise capital>>

      That's what every company should do, IMO, or get loans. This idea of mgt. retaining *my* earnings and then blowing them all in some future disaster is not for me. I want my earnings now. I will decide how to reinvest them. And we would have a lot less "earnings management" if they had to pay them all out in cash.

      Thanks for the help.

    • If you want to understand why wall st. thinks this stock is risky, look back and research a company called Sirrom Capital. It was a BDC, structured much like ACAS, that imploded on itself, as it made some very bad loans, then followed them up with with more bad loans to the same companies. (BTW, this is an argument that several of the shorts used against ACAS).

      The inherent risk with ACAS is whether or not management can continually manage theinvestments and maintain acceptable loss rates combined with hitting lots of singles, doubles and the occaisional triple and home run. If they do a good job (as they have for the 5 years that I have owned them), the company will continue to grow and prosper as will the share holders. If they don't, major problems happen.

    • <<research a company called Sirrom Capital.>>

      Thanks. I'll do that.

    • The answer to your question lies in the fact that ACAS is a Regulated Investment Company. Their holdings are not very transparent and subject to varying evaluations. Also, they have a varied and uncertain income streams.

      Every thoughtful new investor (including me) asks a similar question and the board is generally very patient in explaining their business model.

      The other question a thoughtful new investor usually asks is how they can pay dividends that are consistently greater than their earnings. In simple terms, they distribute some capital gains (on top of earnings) as the businesses in which they invest do well.

      I am no expert here but that is what I thought the board explained when I showed up here. If I am wrong, I trust those better informed than I will correct the mistakes.

      I am very comfortable with ACAS, their dividends and business model.


    • "If they do a good job the company will continue to grow and prosper as will the share holders. If they don't, major problems happen. "

      Hardly unique to ACAS. AT&T and Kodak come to mind as "rock solid" companies where management drifted off course or ignored reality and growth & prosperity became history.

    • Thanks again for the Sirrom reference. It was instructive.

    • You're welcome.

      One more tidbit. If you really want to understand how ACAS works, go back to about message number 200 or so, and invest several hours reading the next few hundred messages by JJR1998, OTE and a few others. Best instruction you will ever get, and it is free.

      Best of luck.

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