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In order to enter the commercial finance sector and further expand the financing options that it provides to its customers, Hercules Capital, Inc. HTGC has acquired all the outstanding equity of Gibraltar Business Capital. This investment is expected to be immediately accretive to Hercules’ investment income in 2018 and generate a cash yield of approximately 10-14%.
Gibraltar is a leader in providing working capital to small and mid-market businesses through its asset-based loan and factoring solutions. While Gibraltar will now be held as a portfolio company of Hercules, it will continue to operate as an independent senior secured asset-based lender to selected small and mid-market businesses under its own brand name.
Gibraltar was formed in 2010 and since then it has underwritten more than $325.0 million in total credit facilities to more than 170 borrowers.
Manuel A. Henriquez, founder, chairman and CEO of Hercules said, “Our acquisition of Gibraltar, Hercules’ second strategic completed acquisition, represents a unique opportunity to invest in one of the leading established asset-based lenders in the country. This investment represents a highly attractive return profile, and together with our continued ‘slow and steady’ growth strategy, will help provide greater potential financial return to the benefit of our shareholders over the long term.”
Henriquez further added, “We are very pleased to welcome Gibraltar’s newly appointed CEO Scott Winicour and the entire Gibraltar team to the Hercules family of portfolio companies. With our financial backing, we anticipate growing Gibraltar’s existing business offering and overall loan portfolio.”
Pleased with the deal, Winicour said, “This is an important transition for Gibraltar as the investment by Hercules, coupled with our credit line, provides us with deep access to capital to empower our growth and amplifies our commitment to deliver value-added lending services to businesses, which have been the hallmark of our success.”
Given a solid liquidity position and robust loan originations, Hercules remains well positioned for growth in future. Moreover, the company is likely to witness a growing demand for customized financing, based on market optimism for public equities and an improving economic environment.
Shares of the company have gained 1.3% in the past six months compared with the 2.3% loss incurred by its industry.
Currently, the stock has a Zacks Rank #3 (Hold).
A few better-ranked stocks in the finance space are Ameriprise Financial Services AMP, BlackRock BLK and Federated Investors FII, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ameriprise Financial’s Zacks Consensus Estimate for earnings for 2018 has been revised 9.6% upward, in the last 60 days. Also, its share price has increased 17.5% in the past 12 months.
BlackRock’s current-year earnings estimates have been revised 9.9% upward, in the last 60 days. Further, the company’s shares have gained 40.7% in a year’s time.
Federated Investors’ Zacks Consensus Estimate for earnings for 2018 have been revised 16.8% upward, over the last 60 days. In the past year, its shares have gained 28%.
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