Agree that oil price has to stabilize before BDCs will settle down. But lately, I believe even oil stocks started to decouple from oil price and today PNNT, one of the BDCs that had been affected by oil price the most previously, dropped only 0.39% despite its latest NAV of 9.02 (dropping from 9.82) and its NII of only 0.25 (with 0.02 fee waiver). However, I don't believe it will cut its dividend from its previous 0.28, and if it will declare the same 0.28 dividend on around March 2-4, then its yield, at its closing price of 5.07 at closing today, will be a whopping 22.09% yield, and with a 43.8% discount. How much would the market expect it to drop if oil tanks to $20 a barrel? I have no idea but I know a lot of shareholders would not sell as long as it can sustain its dividend or cut it only by a few cents.
clrodrick, I am glad to hear you got out of MDLY which is simply a lot more risky than most BDCs since it was traded with a high premium, with a yield that is less than a lot BDCs and its profit depends solely on two companies managed by it. pacman had now used several new alias to continue to pump it. Nothing good will come out of it. It may meet a fate like that of FSAM soon.
ETJ may be a good buy if the market rebounds.
I surely understand, bigbear. My friend started using margins to buy today, and that was very risky but he has been doing this. Right now, there are a lot of BDCs with huge discounts (40% or higher) and huge yields (18% or higher). Many may be worth more if they would go broke or being taken over. In short, in a way they are really not any more risky than some of these junk bond funds that pay less than 7% yield (HYG, JNK) and with holdings that are rated worse than those of BDCs, no worse than some of these tech or biotech stocks with high valuations. I would never buy TWTR, LNKD or FB. That was like playing with fire.
This was what I just posed on the AINV MB:
"Did any of you notice a very small BDC, RAND, shot up 25.3% today, its trading had to be halted. Its volume today was 99,816 vs a daily average of 1,234. I wonder it was going to be taken over by a bigger BDC?
Previously, when MCGC started liquidating and was taken over by PFLT, its price shot up. Look at TICC, one of the BDC doormats, dropped only 2.27% today. The most likely take over BDC may be KCAP or FULL."
That means any WEAK BDCs may easily shoot up if it becomes a take over target.
With a new NAV of only 7.56, it is possible that it can only cover a 76 cents annual dividend and not its current 0.80 cents. That said, with its buying back 62.4M worth of shares in the last few months, it is very possible for it to continue to maintain the same dividend. At closing price of 4.28 today, that is a 18.69% yield. Says it will cut it to 0.17 per quarter in the worse scenario, that would still be a 15.9% yield. The way it had been dropping, I won't be surprised to see it dropping to 4, then its accidental yield will become much higher. The funny thing is its NAV only dropped about 3.45% from last quarter, actually better than a lot other BDCs (such as FSC, PSEC, PNNT), and at today's closing it was traded with a 43.38% discount. IMHO, I do believe further drop in oil or energy price may have less and less impacts on many BDCs that already dropped so much. Take a look at PNNT, it only dropped 0.39%. Many BDCs are now with discounts that are 40% or higher, many of them will be worth more if they go bankrupt or get taken over.
Did any of you notice a very small BDC, RAND, shot up 25.3% today, its trading had to be halted. Its volume today was 99,816 vs a daily average of 1,234. I wonder it was going to be taken over by a bigger BDC?
Previously, when MCGC started liquidating and was taken over by PFLT, its price shot up. Look at TICC, one of the BDC doormats, dropped only 2.27% today. The most likely take over BDC may be KCAP or FULL.
Incidentally, lately there had been a lot of BDCs joining the rank of being BDCs that pay a yield of 20% or more. The really funny thing is a lot of them had already declared their next dividends, yet they continued to drop this week. I had never seen anything so weird.
Example, CMFN continued to drop like a rock, made a new 12-mo low of 6.33 earlier today and it had already declared its next qtr dividend of 0.3516 (1.4% higher than previous dividend) with an ex-div date of 3/16/16, that was a frightening 22.21% yield. Its recent NII of 046 also beats estimate by 0.08. So what was the catch? Well, its NAV did drop from the previous 13.65 to 12.17, ouch! But with a closing price of 6.92 (back from 6.33), that is still a 43.1% discount and a very respectable 20.32% yield, so why so many decided to dump it this week? Its volume today was 132,123 vs a daily average of 26,504. The funny thing is all those people who sold it LOW would probably return and start buying it back and put it up sharply.
Now please understand that I really have no intention of trying to pump any BDCs because any one of them recently had dropped 10-20% all of a sudden, some time in a single day (like GLAD dropped 20% on 1/20 and MAIN -10% on the same day). Today AINV dropped about 10% after dropping badly yesterday because it was being downgraded yesterday and again today. The funny thing is it just declared a 0.20 qtr dividend (same as previous) with ex-div date on 3/17/16, its recent NII was 0.21 and it had bought back 62M dollars worth of shares in the past few months. Despite the fear of its oil holdings, its NAV only dropped 3.45%, from 7.83 to 7.56. It closed at 4.28 today, down 9.51%, about a 43.4% discount and a 18.69% yield.
It will probably declare its next dividend during March 2-4. How much dividend everybody believes it will declare?
Despite its recent NII of only 0.25, but with a recent management fee waiver of 0.02 per share, and the fact that it had been paying the same 0.28 dividend since Dec. 2011, had not once reduced its dividend even during the last market crash, I tend to believe they may continue to pay a 0.28 dividend. If that is indeed the case, then at its closing price of 5.07, that is a very respectable 22.09% yield, with a 43.8% discount off its new NAV of 9.02. May be that was why despite many BDCs got slaughtered (again) today, it dropped only 0.39%. I believe if it would declare a 0.28 dividend, it will fly. I was hoping to add more at below 5 but missed the opportunity today. I better put in a buy order now.
Good job, J1. I was surprised to see I was already turning a profit on my SCM and up at least 1k on those I bought today. This is a brutal but very profitable market. If it remains volatile like this, my friend and I would make a lot of money this year.
What I really cannot understand is why investors would buy and hold junk bond funds like HYG and JNK when their yields are 7% or lower, with risks that are much higher but yields much lower than that of pref. stock CEFs (I added more FPF today, it pays a 9.5% yield at one point when it made new 12-mo low) and much much worse than that of BDCs. It is hard to understand the market.
It was not my wish for anybody to start buying it because I hope it really drops close to $4 and I can add a lot more.
I was very surprised to see I already turned a profit on SCM, after buying it at 8.4567 on 2/8, then at 7.527 this morning, then more at 7.28 before it made a new 12-mo low of 7.15. I was surprised to see it close at 7.99, and my average cost of it is 7.753. The funny thing is it was just upgraded to Outperform by two analysts (I did not pay any attentions to them) with a target of 11 on 1/20. For it to drop that much is really irrational, IMHO.
I really not encourage anybody to buy any because it can indeed continue to drop, how low would be anybody's guess. I do have one suggestion for you and you might already have done it, if that is the case, please accept my apology, for making suggestion to a seasoned investor like you.
You said FSC is one of your big holdings, correct?
I wonder if you had sold some of it when it rose to around 5.98 on around Feb. 1?
Many BDCs always rose and fell, even though you might have bought a lot of any of them in very high prices, when it started rising a lot from its bottom, you almost would want to sell some of it. Then wait for the opportunity to buy back the same number of shares when it tanks badly.
FSC had been up and down for at least 3 times since 1/20/16. That way you would have the same number of shares (for dividends) but you would free up some cash by trading and lower your average cost of it. Now once again, you might have already done it.
At its closing price of 4.63, it was 44.95% discount of its NAV and a 15.55% yield for at least the next three months. With a NV of 8.41, I expect it to meet at least 0.84 which should be sufficient to cover its annual dividend of 0.72. Its NAV for last 4 qtrs are: 0.18, 0.18, 0.21 and 0.19 and forecasted NII for future qtrs are: 0.19, 0.2, 0.2, 0.2, 0.2. In short, it does not appear it would have troubles to cover its 15.55% accidental yield for at least this year. If Yellen is crazy enough to raise rate, especially more than 1% this year, it would be great for FSC. If the worse happens and FSC goes bankrupt or gets bought out, it would be worth more to shareholders, IMHO. Therefore, I initially bought some more FSC today at 4.60 in my E*Trade account, wait to wait till it drop before I added more, but decided I better bought more. I added more at 4.61 for my other account. I really do not believe it would drop below 4.50 but will rise back to or above 5 in no more than a month.
To show you how crazy this market was. I just bought some SCM at 7.53 (did post it earlier) and now it rose back to 7.82. Wow!