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Prospect Capital Corporation Message Board

  • jadelover8888 jadelover8888 Aug 13, 2010 11:26 AM Flag

    PSEC is undervalued!


    PSEC, with a NAV of 10.09 and was currently sold at $ 9.43, that is about a 6.5% discount. It pays a monthly dividend of $ 0.1005, which equates a 12.79% of annual return at $ 9.43.

    There seem to be a lot of insider activities, according to E-Trade:

    The last PSEC insider buy occurred when BARRY JOHN F III purchased a total of 40,000 shares on May 25, 2010. In the last 5 years insiders have on average purchased 304,952 shares each year.

    Detailed summary of insider activities:

    Date Name-Position Transaction Shares Price Range ($) Shares Held Mkt Value
    5/25/10 Barry John F III
    Chief Executive Officer Purchase 40,000 9.72 – 9.72 1,043,030 $388.9 K
    5/21/10 Barry John F III
    Chief Executive Officer Purchase 22,697 9.98 – 9.98 1,003,030 $226.4 K
    5/13/10 Barry Matthew C
    Unknown Purchase 450 11.04 – 11.04 1,406 $5.0 K
    5/12/10 Stark Eugene S
    Director Purchase 500 11.00 – 11.00 5,825 $5.5 K
    4/29/10 Barry John F III
    Chief Executive Officer Purchase 65,417 11.00 – 11.91 980,331 $748.2 K
    2/12/10 Stark Eugene S
    Director Purchase 500 10.50 – 10.50 5,148 $5.3 K
    1/27/10 Barry John F III
    Chief Executive Officer Purchase 119,164 10.48 – 12.22 914,913 $1.3 M
    11/19/09 Barry John F III
    Chief Executive Officer Purchase 34,136 10.68 – 10.68 795,748 $364.7 K
    11/18/09 Eliasek M Grier
    Chief Operating Officer Purchase 9,500 10.70 – 10.70 38,775 $101.7 K
    Barry John F III
    Chief Executive Officer Purchase 53,400 10.69 – 10.75 761,612 $571.8 K
    11/11/09 Stark Eugene S
    Director Purchase 500 10.25 – 10.25 4,500 $5.1 K
    9/29/09 Anderson Graham
    Director Purchase 2,000 10.66 – 10.66 45,000 $21.3 K
    Anderson Graham
    Director Purchase 2,000 10.66 – 10.66 4,500 $21.3 K
    9/28/09 Barry Matthew C
    Unknown Purchase 450 10.37 – 10.37 860 $4.7 K
    9/25/09 Stark Eugene S
    Director Purchase 1,000 10.10 – 10.10 3,852 $10.1 K

    In short, I believe PSEC will have no troubles in meeting their current dividends and at today's price of $ 9.43, it is quite undervalued and offers a very attractive return. Of course, you have to make your own decision. I just bought some more of PSEC.

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    • I agree undervalued, and I like that management believes their own story by buying so much stock with their own money..

      How many times have you seen management talk about wonderful prospects for the company while they sell their own shares? - not so with this company..

      They put their money where their mouth is..

    • Yes, I agree,I bought at $12.44.

    • Over the last six years PSEC increased their dividend every quarter until the cut occurred in June, 2010. They could no longer support the old dividend based on earnings or capital gains.

      The new dividend is paid monthly and it is obvious that the Board of Directors is setting up future dividends such that they will increase each monthly dividend by a modest amount. Note that the last two of the first three monthly dividends are a slight increase.

      The Board of Directors obviously takes pride in being able to establish a long term record of increasing dividends, and I believe the large cut in June was to set them up to be able to increase the new dividends by a modest amount for the foreseeable future.

      As of March 31, they had a very low debt to equity ratio. Since then they have made many new investments which should add to their net income in the future.

      I think it is HIGHLY likely that the next dividend announcement will be for three more monthly dividends with a modest increase from the first three.

      The primary risk to this company is a double dip recession, which is uncertain at this point.

      If there is no double dip in the next year or two, this stock could easily hit 11 or more again, and in the meantime you collect about 13% on your money.

      It is clearly undervalued in my opinion and I continue to buy more.

      • 2 Replies to Ribi1
      • Hi Ribi,

        As usual, I say ditto.


        PSEC is back on my buy the dips list and after todays dip I will elevate it to a strong buy.

        MNTA is also a strong buy, if you are interested.


      • Ribi1,
        I am with you. This is undervalued.
        Much of the sell off is due to the perception by retail investors and some on this board that they cut their "dividend". Sophisticated retail investors and institutional investors consider as yield only that which is supported by net operating income. Anything else is return of capital.

        I believe that a double dip recession is about 50% priced into this market even though it is highly unlikely.
        First, all recessions since 1961 and the double dip in the early 80's was preceded by Fed tightenening and an inverted yield cuve. The current spread on the yield curve is less than 4 months ago but is at 275 basis points. Secondly, if a double dip approaches the fed can and will take further aggressive action with quantitative easing and balance sheet expansion. Thirdly, Fed actions would probably be sucessfull.

        Bottom line: market pricing in a 50% probability of a event with a less than 10% possibility.

    • Annual yield is 13.57% not 12.79%.
      Monthly distribution of $.1005 is 1.0657% on $9.43 price. Reinvested each month at that price will increase shares held after 12 months by 13.57%. If the price goes down then the shares accumulated goes up. If the price of the shares goes up you will end up accumulating fewer shares but will end up with greater value. The principal concern is that the distributions not be cut and be covered by NOI.

    • The div was cut and it looks like another offering will be made.
      So tell the whole story, please!

    • Me too (think it is undervalued AND bought more shares, over the last few days)!!!

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