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Prospect Capital Corporation Message Board

  • suadela24 suadela24 Jan 7, 2013 2:51 PM Flag

    im a newby

    I just joined you guys and bought today , I have been reading the
    post here and like the optimism you guys have been posting .
    II\might be asking some dumb questions in the future , lol

    Thanks for all your info

    Janet

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I hope you truly understand both the rewards and risks of buying and holding any stocks especially those that pay high dividends such as REITs and BDCs (including PSEC). Usually the higher their dividends, the higher their risks will become. Of course, at this time, PSEC may still be one of the BEST BDCs one can buy and if it can stay above its 200 day moving average of 11.22, it may continue to reach $12. PSEC had not reduced its dividend since it changed from paying a quarterly dividend to a monthly dividend and they continued to raise its monthly dividend about 1/10 a penny at a time so that they can continue to boast that they have been increasing dividends. As long as the FED holds interest rate artificially low, then most BDCs will continue to make money. The problem is the FED already tried to say they would stop any QEs after 2013. If interest rate starts rising (it had), watch out, some REITs will fail first and will have to cut their dividends and some BDCs will soon follow. Also, PSEC is now being traded above its recent NAV of 10.88, that means you are paying a premium for it unlike many of those including some pumpers in this board who had paid below NAV. Their risks are much lower than yours. In order for any BDCs to make money they have to periodically raise new capitals by issuing more new shares, some time at below the NAV of their stocks, that would mean as soon as any new secondary offerings are announced, the price of PSEC will usually drop 4-6%, which will wipe out your next three months' dividends. That will mean the higher PSEC rises, the more risky it will become despite its high yield. Another problem is now the stock market is the highest during the last five years and we are going to face the debt ceiling fight on March, and debt ceiling may be reached in the middle of February and the chance of PSEC having aother new offering on February is quite high. Therefore, you almost have to be prepared and have some extra cash on hand so that if price of PSEC drops, you can accumulate more if you really believe it is a great stock. If you only have limited funds and your main purpose is trying to obtain a reliable and safe income monthly and you have a low tolerance for risks, then you really have no businessness in buying and owning any high dividend stocks including PSEC. You should never never buy and hold any stocks just because other stock holders appear to be optimistic because in 2008 not too many people believed or expcted a big market crash. Most of them were VERY VERY optimistic and everybody was buying like no tomorrow. Many of those people had left the stock market forever and may never return and therefore the recent trading volumes that resulted in the recent rally including that of PSEC were were really really thin. The recent rally can disappear as soon as these large hedge funds pulled their money out, which they can do so in seconds with computer trading. Just consider this: some financial experts believe the best they can do in 2013 in the stock market is about 11% (most optimistic) and most of them expect only a 4% total return. Do you really believe many of these PSEC holders can obtain a return that is higher than 11% by just buying and holding PSEC in 2013? When it is too good to be true it is too good to be true. No pun intended. Jade

      P.S. Now after I posted this, I would probably attacked by all these "optimistic people" and do I care? Heck, no.

      • 2 Replies to jadelover888888888
      • Are you aware of the magnitude of capital raised in the last two months of $B and the size of their pipeline of attractive deals in their pipeline? Suggest you do more homework and understand the potential of greater earnings growth than ever achieved before.In recent talks with management, who by the way have increased their holdings recently,have indicated that the next funding when needed,will be by debt,not equity. Insiders are buying for coming higher share value as well as increasing dividends. My holding is now north of $1M and am expecting appreciation of 50% this year. Obviously,I care and stay in close touch with management. Check out their earnings call on Feb 4 for good news.

        Sentiment: Buy

      • Jade ,,

        I appreciate all that information and the time you spent educating me ,
        I see that I really have to be careful when investing in these stocks .

        What does the acronym BDC stand for ? shows you how clueless I am .

        I have to admit I was atrtracted to the return and also bought some AGNC , keeping
        everything crossed and hope I made the right decision .

        Janet

    • Welcome, pick up more if it dips. Cheers.

 
PSEC
9.45-0.03(-0.32%)Nov 26 4:00 PMEST

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