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Prospect Capital Corporation Message Board

  • eagles123 eagles123 May 16, 2013 3:58 PM Flag

    Jade could be right but....

    Looking back at the charts PSEC is somewhat cyclical and could reach below 10 at some point. But who cares? Depending on your outlook and holding strategy, those who have held for for the long term in most cases have made money. And if it hits the 9s again, i will buy more. PSEC is one of the few BDCs that are now becoming partially a REIT now investiing in real estate. It is a new diversification strategy that I agree with. Do I think Jade is right that it will hit below 10.50? Mabye. Do I care? Nope! Because his investing strategy differs from mine.

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    • Looking back at PSEC's adjusted close price in its price history to see if there may be some truth to your statement "those who have held for for the long term in most cases have made money". In most cases, you are correct in that if you hold PSEC long enough, you may end making some money. The problem is, not the 12.2% you will expect. Give you an example:
      If you bought PSEC on 7/10/12 at its closing price of 11.90, with dividend, its adjusted close price will be 10.92 and use today's closing price of 10.93, holding your PSEC shares since 7/10/12 will earn you a total of 1 penny despite its monthly dividend of 11 plus cents. Now if you had the misfortune of buying it on 10/17/92 at the closing price of 11.93, its adjusted price after dividend will be 11.24, you will still have a loss of 31 cents loss per share after receiving all these dividends since last October. It will take you another three months just to catch up provided if PSEC will not drop again. If it does, then it will take longer for you to break money. Make money? Not likely.
      As a matter of fact, if you had the misfortune of buying it in this year (2013), the chance of your losing money is much better than you making any money, if you do not believe me, look at the adjusted close prices of all trading days in 2013. That is pretty bad for a stock that pays you a 12.2% dividend and end up losing money. You will be much better off buying VCLT or other bond funds.
      Now if you go back more, you may indeed find some days when you would buy PSEC that may indeed give you a decent return, but is it really better than some more reliable dividend stocks such as JNJ, T, CLX, MO, etc.? when you add appreciation of the stock and its dividend. I bet PSEC will get beat by many of them. As a matter of fact, if you just bought and held index funds such as SPY or IWM, they will outperform PSEC.

      In short, don't be foolded by high dividend if a stock continue to drop in price, that is just a dividend trap.

    • I do not think it will return to 10.
      the dividend had been raised since that occurred, Also that was due to fiscal cliff worries.
      People are always looking to add or take a position if it drops...that gives support and with a higher divy the yield increase draws buyers.

      Why even mention a basher who has been wrong for months? you feed the attention that he is here for.

      • 2 Replies to shiftsuper175607
      • Basher should change their name to Achuthan !!!

        Sentiment: Hold

      • Don't be so sure, of course it can return to and below 10 if its previous 12-mo low is 9.80. Anything than went up must come down. You should have better common senses in making a statement like that. Right now the people who are buying PSEC are not predominately small investors. 31.1% of its shares are held by institutions. Its monthly short volume had just gone up from March's 6.54M to last month's 7.03M. Look at its volume, when it dropped, its daily volume shot up, who do you believe were buying it? Investors like you? No, they will be large funds and day traders like Instant who was gambling with the stock. When they start using more and more margin debts to gamble on stocks like PSEC, what do you believe will happen? If BDCs like TCAP and TAXI could drop big in a single day, do you believe this will not happen to PSEC. PSEC is now in one of the official index, that means many funds can now own it, that is the good news. The bad news is all these funds have computer trading program to stop loss, if PSEC's price all of a sudden drop, these automatic sell orders will be automatically triggered and make the drop much worse. I actually believe the chance of PSEC drops to or below its previous 12-mo low of 9.80 in the next twelve months is at least 35%. The problem is PSEC has been paying such a high dividend that was not sustained by its earnings, which means its NAV will further decline. In order for it to continue to pay these high dividends and maximize their fees and bonuses, they must continue to expand their investment portfolio by issuing more shares via ATM or SPOs, or by issuing more senior convertible notes. As its portfolio keeps expanding, it will run into problem with non-performing and under-performing loans. It is that simple because it had already created problems with other BDCs such as PNNT, NGPC and RETIs such as AGNC and MTGE.

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