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Prospect Capital Corporation Message Board

  • easlar easlar Mar 2, 2014 1:50 PM Flag

    Investment Company

    My friends and I actually are going to start a small investment company. There is about 25 of us all kicking in anywhere from $500 to $2,000 We will start around 35-40k in capital but we are not going to buy businesses we are going to invest in high yield stocks to reinvest dividends in. Our plan is to only look at stocks at 10% or higher with a preference for monthly paying stocks to compound quicker. As the shares grow at the end of the year we will look to stop reinvesting dividends and look at other stocks to put them in to diversify. We are going to start with 7-8 stocks probably these seven though we have not made up our minds yet. The two who were unanimous were PSEC and APO. We should hit about 14-15% on this portfolio with growth potential in the share value as well.

    PSEC
    APO
    ORC
    JMI
    ROYT
    CYS
    HGT

    Once we get the shares bought I will let you guys know so it can be tracked

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    • Easiar - Take a look at NRZ Currently paying 10.5% and most likely will raise their dividend this Qtr.
      Cheers
      Spyder

    • Your tax reporting for ROYT is going to be a nightmare unless you have a tax professional in the "club".

      And since you're only starting with 35-40k I would limit your initial purchases to 3-4 .

      Sentiment: Buy

    • also look at bbep arp mlp's paying over 10%

    • all I can say is that with companies with those types of yields there are lots of risks, BDCs rarely grow in value as they pay all out and my feeling is that only through compounding of yield will you grow but not as fast as if you chose good companies to start, I would suggest looking at GILD right now as I expect it to grow considerably more than the 14% yield you will be getting in the next couple of years. another is IPCI GLTU

    • How does an investment club handle record keeping for tax purposes?

    • You mean investment "club". Also, 40k is nothing, just put it all in psec Monday and you should do well.

    • I don't understand the 14 - 15% when APO is paying less than 2% and PSEC about 12%.

      I don't know what benefit you get from this that would offset the likely disagreements over investment choices, etc. I also think you should check out any laws or regulations that may apply here ... not sure there are any as I have never looked into it or invested this way, but there might be something [e.g. someone needs to be a broker dealer to invest other people's money].

      I would forget the idea. Put $2,000 in PSEC, and put it on DRIP. Frankly, it's not enough money to spend much time on. GL in any case.

      • 3 Replies to ray858945
      • povertysucks@ymail.com povertysucks Mar 2, 2014 5:52 PM Flag

        I have been leaving msgs here about special dividends.
        I did not know anything about APO.
        APO is not a monthly paying dividend, it is quarterly.
        APO paid four special dividends the last four qtrs totaling 3.62 / sh, or one special dividend / qtr.

        Thank you easlar for the introduction to APO..

      • APO base quarterly dividend is .15 a share but every quarter there is a special dividend this last quarter (paid the 26th) it was .93 so the total dividend was so it was actually $1.08 per share. The last four quarters combined dividends have totaled $3.98 per share which is 12.4 % PSEC is 12% ORC is 17% JMI is 12.4 ROYT is 12.7 HGT is 10.2 and CYS is 14.55% Off of this list I own APO, PSEC, and ORC in my own account. We may end up a little under or over 14% it just depends on what percentage we put in each one.

        No we are not doing it as a club it is being formed as a company. A "C corp" to be exact. There is a CEO/President which has the final say of it all. Any shareholder can make a suggestion but the final decision rests with the President/CEO. The initial stock selection was determined by the group. When we put this together we decided to do it as a C corp so we could put in extra capital if we wanted to via a share purchase. It is set up so that option comes every 6 months for two years. You can buy shares at a 5% discount to NAV up to the $ amount of your initial investment. We are buying the shares at $1 each to start (40k shares) but six months from when we start if the value of the holdings is 48,000 and we started with 40,000 shares new shares will be sold at 1.14 a share. If they are $30,000 it would be .715 a share. This gives a 5% return on your followup round of investing. It isn't required but everyone will do it I am pretty sure.

        You guys are right 40k is not a lot of capital to start with but we will not be taking anything out for two years so it will grow via share appreciation (possibly) and compounded dividends through reinvestments. In roughly 5 years we should hit 100k of value if not a little sooner depending on how the market does over that time and not factoring in additional investments.

      • There will probably be a lot of arguments about what stocks to pick with a group of 25 people. That will mean more work and less positive results. IF you are really serious about wanting to make serious money and you have confidence in PSEC invest your $2000 in PSEC and drip the monthly dividends. You can buy about 181 shares to start and the first dividend will be about $19.97 dripped into additional shares at about the current price will give you about an additional 1.808 shares. Also add about 20% of your income each paycheck and if you are young enough and PSEC doesn't do anything stupid and the world doesn't end you can have your retirement nest egg all ready for you. The more you put in the more you could have. $1M $2M $5M it all depends on how much desire you have to make it, and most important THE COURAGE TO DO IT.

        Good luck
        b&w

 
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