ACAS is up about 2% from its year ago price of 13.87. ARCC is off 1.78 from its year ago price of 17.94. This nets to a .16 loss or about 1% after factoring in 1.78 of dividends. PSEC is off 1.31 from its year ago price of 11.21. This results in a nearly unchanged position after factoring in dividends of 1.33.
Conclusion: ACAS is caught up in a general selloff in BDC's.
Bottom line: it appears that the 5,000 option trade today was a sale by a holder closing out a long position.
I am perplexed as I now see about 10,000 options outstanding compared to my recollection that there were previously about 15,000 shares outstanding.
This puts ACSF at a discount to NAV of 11.3%. This is better than the 16.5% discount for AGNc and the 30% for ACAS. It appears than ACAS is restructuring into a investment manager and an ACSF with the hoped for narrowing of the discount.
This is the first day in the past 5 days without dumping in the final few minutes on hundreds of thousands of shares.
The market is being manipulated with final minute sells in volume to drive the price lower. The pps will not recover until the market sees that these trades cease. It is now 3:45. Let's see if this is the end of "painting the tape"..
Yes, big seller dumps stock in last 5 minutes. Clearly, this seller or sellers is more interested in driving the price down than in maximizing the proceeds. Any buyer is best advised to wait until the last few minutes of trading.
I continue to lament the absence of sock buy backs and am amazed at the continued optimism on this board that the planned restructuring will promptly reverse this bearish trend.
The last minute today showed about 250,000 shares sold aggressively. The same pattern yesterday.
The seller could have offered theses shares earlier but chose the close to force the price down.
Thank you for your reply. I continue to accumulate and hold a very large position and hope you are correct. As expressed, I am mystified why the market skepticism appears to grow in the face of the upcoming reorganization.
Also, if the reorganization fails to materially narrow the discount then hopefully buy-backs will be resumed.
Are you saying that if the discount fails to narrow after a reorganization you would continue to patiently hold? If so,
what event or time period would have to occur that you would change your mind?
You could have over 17.50 right now if you had sold earlier this year at the January 21st price of 16.37 and reinvested in the S&P 500. The stock is lagging the market badly just when the reorganization is becoming more obvious. This is troubling. Yes, money is made by betting against the market but the gap usually closes not widens over time.
The catalyst expected to close the gap has become a moving target; it was expected to be when the market first learned about the reorganization, then it was when it was discussed by management, then when the 2nd quarter earnings report was released, now its Q3 or year-end results or implementation of the reorganization. If the benefits of the reorganization are so clear then it appears that the market participants must be brain-dead.
One plan clearly works over time and may have to be reinstated: stock buybacks.
I want to be sure that I understand your reasoning. You appear to be saying that ACAM, which is valued on the books at $925 million , or about $3.43 per share, might be worth in a spin off at about $4.00 per share ($1 to $1.2 billion).
This is not much of an uplift so I assume you believe that there will be a considerable narrowing of the discount on the $16.69 remaining assets held by ACAS.
If this is your conclusion then I hope you are right. The market continues to express increasing skepticism about the possible reorganization. What catalyst do you think could change the markets view: 3rd quarter earnings release, announcement of reorganization plan, year-end earnings release, implementation of the reorganization, a year or more track record for the reorganization? Is it possible that the discount won't be contracted until we go through another market cycle?
Is the reason that management would not sell ACAS for NAV because they are trying to maximize shareholder value or is it because they wont to hold on to their salaries?.
Stock valuations are far more dependent on PE ratios than dividend yields. The earnings yield (reciprocal of PE ratio) for ARES is about 13%. ARCC has an earnings yield of 12% and PSEC 11%. Most BDC's have dividend yields of around 10%.
The AM's such as BEN, TROW have low dividends but a double digit PE ratio Therefore, they have an earnings as a percentage of PPS of 6% to 8%. This means that they can pay a dividend and continue to reinvest and grow. ACAM pays 11% but that is 100% of earnings. You appear to be more focused on dividends which can be an apples to orange comparison rather than earnings yield which is more of an apples to apples comparison.
Thank you for your input. I am heavily invested in ACAS and hope for a positive outcome.
I am not drawn to a valuation based on dividends but instead focus on earnings. The comps you refer to as paying 2,3% dividends are retaining considerable cash flow for growth and are companies with long and successful track records. The sum of the annualized distributions by ACAS and ECAS is $218M. Theses may not be indicative of future distributions because of cyclicality. However, if I used these distributions and apply a 10 multiple I get $2,180M or 461M more than the values of ACAM and ECAS on the balance sheet ($892M and $827M, respectively). This would be a favorable outcome and a higher than 10 multiplier would be even better. My concern, expressed previously, is that the appropriate multiplies may be closer to 8 times with no accretion to book values. Obviously time will tell. So far the market does not appear to be overly optimistic.
Your points are well taken and I hope you are correct. However, I have done better when my investments are based on objective realistic projections rather than hope. Valueline today lowered the EPS projection for 2015 to 1.00, in the ballpark with other analysts. I hope that this can support a price of $20 pert share even though the PE ratio is above what I would pay.
You may be right but I would prefer that the future be based on projections rather than hope. Clearly, ACAS has been more successful with equity than debt investments, but are now strategically moving away from equities. Also, this recent avoidance of leverage coupled with emphasis on low risk floating rate debts appears to indicate that management plans to keep a low risk profile for the remainder of this business cycle. If so, then then the pps may not approach NAV for several years. There may be a significant time cap between management plans and market expectations.