SAFM uses buyback to offset dilution from its generous employee stock bonus plan. Very executive and employee friendly, not so much for share holders.
SAFM is so undervalued it is a crime. Part of the blame lies with the shorts. Part of the blame lies with the BOD who are too reluctant to reward investors. Perhaps this is part of the plan to maximize the buybacks. Let the PPS dwindle? As long as they are buying back I can live with it......
Birnbaums share purchase was well timed.
Joe Sanderson, you have plenty of income from operations to fund growth. You have the credit line for hundreds of millions. I would not characterize your dividend policy as shareholder friendly. In a year when the employee bonus is up considerably there is no raise for investors? Many companies aspire to pay out more each year. Or are you putting all your cash into buyouts?
BDCs Benefit From Less Bank Competition
Business development companies are benefiting from less bank competition in leveraged loans driven by higher regulatory capital requirements and increased oversight of leveraged loans by bank regulators.
Overall we believe the return environment for new capital put to work by business development companies (BDCs) is positive, with credit spreads widened to normal levels from very tight conditions over a year ago, and a slow-growth U.S. economy that supports interest coverage and relatively low defaults. Some worry spots include relatively high debt leverage on new investments and existing investment portfolio exposure to the oil and gas industry. We believe these risks are more than priced into the shares today.
We are initiating coverage of six BDCs, with Buy ratings on Ares Capital (ticker: ARCC ), BlackRock Capital Investment ( BKCC ), FS Investment (FSIC), PennantPark Investment ( PNNT ) and Solar Capital ( SLRC ), and a Neutral rating on Apollo Investment ( AINV ). BDCs invest in U.S. middle-market companies, primarily via leveraged loans, and act as pass-through vehicles required to pay out at least 90% of taxable income in the form of dividends to avoid corporate tax.
Recent global macro concerns have helped push credit spreads wider this year, closer to the long-term average. We believe this should help alleviate yield compression that we saw over the prior couple of years. Additionally, many of the higher-yielding loans from older vintages have already been repaid, so we expect BDC portfolio yields to be relatively steady going forward.
BDCs are limited to 1:1 debt-to-equity ratio and most target a ratio of around 0.65 times-0.75 times. Only two BDCs in our coverage are below those levels today — Solar Capital and BlackRock Capital. As these companies deploy leverage over time it should provide upside to net investment income per share. While the other BDCs are somewhat constrained by a relatively full leverage level, most books are well seasoned and can provide repayments to recycle into new investment activity.
BDC balance sheets have shifted in favor of floating-rate senior secured loans, while shifting debt liabilities towards fixed rate. While London Interbank Offered Rate (Libor) floors limit the first 100 basis points of rate hikes, accretion from a 300 basis-point increase in short-term rates can add as much as 30% to some of our 2016 net interest income (NII) per-share estimates.
We expect dividends to remain steady with our NII estimates covering the dividends. If oil and gas investments sour, that could mean dividend cuts for those with heavier exposure, but we think it is priced into the shares already (in some cases more than priced in). The combination of low expected credit defaults and fairly steady originations should provide stable net investment incomes for BDCs in our view.
Non-accrual rates for BDCs continue to run below the long-term leveraged loan default rate of 3.2%. While not a fast pace, the moderate growth in the U.S. economy should remain supportive of loan credit quality. That said, pockets of weakness in the energy sector due to the low price of oil may drive additional defaults ahead.
Managements are focusing on potential share buybacks below net asset value. We believe this makes sense for most BDCs and should be accretive to book value and earnings. We would caution investors to expect too much in terms of buybacks as reducing its equity capital drives up leverage and limits the ability to take advantage of pockets of opportunity ahead (e.g., recent spread widening).
The BDC industry has been pushing to remove some limitations for their business, most notably increasing the leverage limit to a 2:1 debt-to-equity ratio from 1:1 and making financial-company investments qualified under BDC rules. We see low odds for these items to be passed by Congress over this year and possibly not next year. That said, if political winds swing in their favor, we believe shares would react positively with the potential for expanded returns and dividend payouts. We view legislation as a free call option for the sector given that it is not priced into the shares.
-- Arren Cyganovich
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This is a market phenomena. This stock and many others are caught up in a panic. TCAP is at book value now, where you really get what you pay for. If it goes lower I will continue to add.
I've put massive $ to work this summer. Bought huge CVX and XOM in the energy sell off. When the BDCs sold off with the MLPs I loaded the boat with TCAP and MAIN. I just filled up a trainload of Wal-Mart. The energy stocks and BDCs have already bounced back and I'm going to enjoy a rich dividend in perpetuity. Do you know that Wal-Mart spends $11 billion a year on capital spending? And Wall Street in its typical over reaction freaks out about some increased investment ($1.5 additional billion a year) that will make them more competitive? So unbelievably short-sighted. WMT is buying back $20 BILLION of its own stock over the next 2 years. The free cash that WMT throws off is staggering. What if they stopped building new stores and return all that cash to share holders. I put 50% of my portfolio in Apple a couple of years ago when it dropped from $700 to less than $400 and more than doubled my $. I expect the same return from Wal Mart....over time.
Now for the turd. Soda. I'm going to sit on this dog until this story plays out. I will do opposite the market and I will buy when the goods are on sale and I'm not selling at book value. Soda is a dollar store special but some day it might be something other than a turd. I won't flush it yet.
Has always been value. Birnbaum doesn't understand that to disrupt the market you need to capitalize on the fact that Sodastream needs to be a volume and value leader. Drop the margins and make it mainstream. You aren't special Birnbaum. Neither is Sodastream. But it could be if it were a volume business and people respected your brand. Failure and declining sales are all that you have delivered. Please sell the company to someone who can run it. Otherwise depart.
Shorts have had such a profitable trade I don't think they care about $0.50. They loaded up in the $100s.
Sold almost half my position to harvest tax losses. The remaining position is in the green. I hope to buy back the shares I sold in 31 days. I hate selling at a loss but look at it as a long term strategy to lower my cost basis and minimize taxes.