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American Capital, Ltd. Message Board

  • bjspokanimal bjspokanimal Dec 11, 2013 6:12 PM Flag

    Significantly OverBought... but now, maybe a healthy pullback

    I like ACAS as a "contrarian" investment because it is rather sickly compared to the best and brightest in the BDC industry (eg: Blackstone et-al) but it has been cheap and does have some potential if they can improve their strategy.

    In Q3, ACAS put up rock-bottom operating earnings, and absent it's share buybacks, it's NAV would have dropped... in sharp contrast to NAV surges in 2011 and 2012.

    Because of that, I expected to be able to buy ACAS in the $13 range.

    Instead, the torrid US stock market has lifted all boats, and ACAS has surged to a price that is beyond what it's poor Q2 and Q3 reports would justify.

    Today's drop below $15 is a first step in a pricing re-set for ACAS. It is over-priced above $14, but it still looks like a good buy between $13 and $13.50.

    Patience is a virtue with this red-headed BDC.

    Spokanimal

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • Still over-bought. Still targeting $13 to $13.50.

      NAV and NOI are still awful. The wildcard remains a spin-off. Absent that, we have a good shot at my target price if 10-year treasuries move north of 3%.

      Stay tuned.

    • Sick boy

    • You already had that significant pullback in June. Since then it is making higher lows and trading above 50/200 MA. If you are waiting to buy this at a lower price then at least sell puts. If you are right about pullback you will get the stock at a further discount and if wrong you at least profit by keeping the premium.

      Sentiment: Strong Buy

    • blair.wagner@snet.net blair.wagner Dec 18, 2013 7:14 PM Flag

      That "overbought" stock keeps rising. At this time, think you will have a long wait for the 13's.
      In the mean time it appears that ACAS is improving and investing on all fronts.

      Sentiment: Strong Buy

      • 1 Reply to blair.wagner
      • You could very well be right, blair.

        As a contrarian investor, I don't "chase price". If I don't get the price I want, then I move on to a candidate where I do get the price I want.

        If I'm wrong and ACAS soars over $16 or $17, then I'll most likely sell all the shares I accumulated for 6 bucks a share.

        The most important thing I learned from people like Rothschild, Templeton and Buffett was "patience"...

        ... and the fact that all of history's most famous investors were "contrariains".

        Thanks, and yes, it could be long wait and I've got the time for it.

        Spok

    • The "healthy pullback" continues, as ACAS moved downward today in a big up day for the market overall.

      ACAS currently sells for a discount of 25% from it's NAV. This company is a buy at 30% discount from NAV, In my humble opinion.

      Realistically, that happens as the stock price approaches $14 or below, as the company also discounts the value of it's European Subsidiary internally prior to determining parent company NAV.

      Otherwise, given the company's sluggish operating performance, and it's declining NAV (absent it's stock buybacks), I would not buy ACAS at current levels ahead of it's Q4 earnings announcement, as there is too much risk of continued under-performance.

      By definition, contrarian investing requires good value... and good investor discipline to wait for the price you require to get that value. Don't chase a turnaround candidate this far ahead of any turnaround.

      GLTA,

      Spokanimal

      • 1 Reply to bjspokanimal
      • Maybe I am not as smart as you. You said: "Otherwise, given the company's sluggish operating performance, and it's declining NAV (absent it's stock buybacks)" Huh... if they hung on to the cash instead of a buyback NAV I would think would be mostly the same state. The only thing that I know that would react poor on NAV is purchases in equity or or operations that under-performed. If I bought a $100 of gold I cannot legitimately conclude it is now worth $150 or $50. They are getting some performance with buy backs but not enough to conclude they are faking out real NAV with overwhelming increases. NAV and SP have been at 30-35% of each other for over a year. They are not closing a gap as to say there is an appreciation much greater than real. So I conclude NAV increases are currently really NAV increases.

        You are making a statement that purchasing their own stock is greater value than its own value, I do not see it like that. You will have to make me understand that there is greater appreciation in ACAS stock than I see.

        Maybe I am missing something.

        Sentiment: Buy

 
ACAS
14.41+0.06(+0.42%)Apr 15 4:00 PMEDT

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