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May 05, 2008 – Comments (7) | RELATED TICKERS: ACAS , UBS

... and UBS loses money. Who are you going to trust?

Ajay Jain says I'm going to lose my shirt. I say Mr. Jain is an ass. We'll see who's right.

Besides, if the stock is at $32, and your price target is $28, and $4.04 in dividends later it reaches your price target, wouldn't it make more sense to keep calling it a "Hold" instead of "Sell"? Someone shorting the stock (not counting the fact that the shorter would get only $30/s initially, because the stock gapped down) will have lost 4c per share, plus trading costs.

Disclosure: I own shares of AmCap Strats, and I intend to buy more for < $30 if I can. So by all means, trust Mr. Jain, because he has a degree and I don't. No skin off my teeth.

7 Comments – Post Your Own

#1) On May 05, 2008 at 4:24 PM, EnigmaDude (58.51) wrote:

Interesting that UBS would downgrade ACAS the day before they report earnings. Do you suppose that maybe they just wanted to drive the price down so they could make some $$ when the share price spikes after the earnings report? Would they do that?

(I am also long ACAS.)

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#2) On May 05, 2008 at 4:50 PM, mandrake66 (74.22) wrote:

I don't have much direct interest in either UBS or ACAS, but downgrading (or changing your estimate in any way, up or down) the day before a company reports earnings is very lame unless there is material news causing them to do so. Otherwise it's at best just a gamble and doesn't help anyone. I wish analysts would stop playing these games.

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#3) On May 05, 2008 at 4:59 PM, xthecritic (87.82) wrote:

I am not long ACAS but I am worried for you guys.  This business model doesn't make much sense to me.  They require constant financing to fund their investment strategies (frequent secondary offerings) which dilute shareholders but then they pay out a ton of dividends.  It seems counter productive.  Why not just retain the cash to fund future investments?

Also, it's not a place I am comfortable putting my money when credit markets are uncertain and after a period of high multiple investing with contracted current multiple.  I see a lot of write offs yet to come from ACAS.  Private equity investments must lose value when public market values contract.

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#4) On May 05, 2008 at 6:17 PM, FleaBagger (27.35) wrote:

Hi there, x. I would hate to assuage your fears, because I do not want other people buying this stock before I get a chance to buy more for myself, but the loans they issue are to solid companies - companies that pay their debts. And this is with 12% interest.

Furthermore, recessions such as this are the best time for BDC's to issue new shares and go bargain hunting. Good for them. They sell at $39, buy at $32, pay out an 11% yield, and meanwhile I'll buy at $30. Sound like a plan?

P.S. Did you know that Aamco is a wholly owned subsidiary of AmCap Strats?

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#5) On May 05, 2008 at 8:26 PM, lquadland10 (< 20) wrote:

$4.04 in dividends I love dividends. 

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#6) On May 05, 2008 at 8:45 PM, AnomaLee (28.87) wrote:

I'm more on the side of x.. I thumbed down Apollo Investment Corporation (AINV) late last year, It was one of the few red-thumbs I orignally had because it was a 5-star stock. I didn't thumb down ACAS because I didn't think their downside was as vulnerable during a period of contraction. (Actually, looking at my pitch on my AINV ended pick you were one of those who replied and called it gutsy) 

I'm still worried about these BDC companies ability to make me REAL money with share appreciation and dividends when they keep dilluting shares. I don't really think you need to try and catch a falling knife here. ACAS is going to go to $26 or lower.

**If you didn't listen to me when I thumbed AINV stock down when it was the top pitch and it was a 5-star stock it's probably going to take a long time before you start making money...

There are safer junk bonds out there with better yields that I'd rather put my money today, but someone has to take the risk and buy all the crap out there.

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#7) On May 05, 2008 at 10:53 PM, FleaBagger (27.35) wrote:

Lee -

I make money every quarter with stocks like ACAS. It's like a high-yield savings account. Okay, no, I suppose it isn't. It's like a super-high yield savings account!

When a company pays a dividend over 10%, there are only two questions:

1. Will it keep paying that dividend? (In the case of ACAS, almost certainly.)

2. What are the chances for increasing the dividend? (Very high.) 

It's not so much like catching a falling knife at this point, but rather picking up a knife that's already on the ground, and using it to rob the chump who dropped it, in this case, Mr. Market. (I'm going to give myself a rec for that metaphor.)

So, if you're a junk bond genius, good for you, but ACAS pays 12% and it's safe (at least compared to junk bonds). If it goes to $26, don't stand between the FleaBagger and his broker.

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