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ACAS lots of room to grow

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February 12, 2013 – Comments (5) | RELATED TICKERS: ACAS

This stock has had a wild ride the last 6 years.  It peaked in 2007 at $50 and prior to that was a great dividend payor.  Then came the Great Recession and this stock crashed ultimately to 60 cents a share in 2009.  I am sure plenty of people got hurt bad.  There was even a successful class action where ACAS had to pay into.  For NEW money, however, that was one of the greatest buying opportunities.

ACAS is a BDC and in order for it to remain as one it had to distribute about $1.40 in distributions in 2009.  So there it was, a 60 cent stock that had to give you basically a $1.40.  Unfortunately they didn't really have the cash so they were able to make the distribution in stock with a small cash payment if elected (think it was a dime).

ACAS came so close to BK that is a miracle it is where it is today.  Closed today at $13.67.  So imagine that you bought for 60cents, was given 1.40 (most of it in stock) and now that stock sells for 13.67 in less than four years.

Now you would say so what, the past is the past.  I only mention it as an interesting side story, but there is value going forward.

Management at ACAS has committed itself to do massive stock buybacks with its profits as long as the stock is selling for less than NAV.  Currently the company claims its NAV is $17.84.  So you have a BDC not paying dividends (which is the draw of that sector) but you have a major price support through the company plowing that cash into its shares which in turn decreases shares and that in and of itself helps push NAV up even further.

Personally I sold Jan 2015 $15 puts for $3.02.  Absent a major setback I suspect I won't be put the shares come then. I will also do dollar averaging in the common on a monthly basis.  Tempted to buy  far out calls but I have to think more on that since I am still expecting a 5-7% overall market correction.

5 Comments – Post Your Own

#1) On February 12, 2013 at 5:58 PM, Mega (99.96) wrote:

How do they compare to other BDCs? CSWC trades at a larger discount to tangible book value. I think there are a few that have better track records.

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#2) On February 12, 2013 at 6:11 PM, awallejr (83.97) wrote:

Oh I think there are other better ones too.  My 2 rl largest BDC holdings (and ones I have mentioned many times over the years here) are ARCC and PSEC.  But these pay out nice dividends.  I point out ACAS more as a capital gains play.  I am getting that same feeling now that I had back in 2009 (just regret not having bet the farm back then but alas, 20/20).

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#3) On February 13, 2013 at 11:30 PM, HarryCarysGhost (99.69) wrote:

Any thought's on MTGE?

My pick and personal holding In the FoxForce5Contest.

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#4) On February 14, 2013 at 12:04 AM, awallejr (83.97) wrote:

Mtge is a Mreit which is different than Acas which is a bdc.  Agnc is the better comparison.  I don't think it is a bad investment, you just have to watch the interest rates.

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#5) On March 14, 2013 at 9:42 PM, awallejr (83.97) wrote:

Any that actually followed my suggestion, you are sitting on about a 33% profit so you might want to take some.

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