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Banks or BDCs?

Recs

7

April 19, 2011 – Comments (6) | RELATED TICKERS: ARCC , BX , PSEC

In 2009 I was a strong player in the banks since I thought they got crushed too much and once Paulson and Bernanke made it clear they weren't going to let at least the major players collapse there was tremendous upside. C and BAC were particularly on my radar, and I had made many an option suggestion on this site.

After all the dilutions I became soft on them and really since the Financial Regulation overhaul and the overly cautious attitudes I am basically cool.  We are seeing it now, with exceptions, that revenues are just not growing.

As for BDCs they are starting to rebound.  Many have reinstated dividends and will surely outpace the banks in growing them.  BDCs can't just sit on their hands by nature of their business.  They are the ones lending to those smaller and mid size cap companies, and if you believe that the US economy will continue to improve, surely they will continue to gain.

I've listed many in the past such as ARCC, BX, PSEC, HTGC, MCGC, all paying dividends again and at nice rates of return.  There are also others that will eventually resume payment, and once they do you will see capital appreciation as well such as FIG, NCT (though that sucker took a big hit after peaking when I chose it in Chimp's contest ;p), ACAS.

So if you want financial exposure I say heck with the banks go BDCs.

6 Comments – Post Your Own

#1) On April 19, 2011 at 7:05 PM, Valyooo (99.43) wrote:

The banks are super ugly right now.  The only american bank I like is C and thats not really a bank play as much as a "i bet without the government selling combined with the reverse split c will hit at least book value" play

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#2) On April 19, 2011 at 7:50 PM, alstry (35.38) wrote:

I just think we should keep making trillions in predatory loans to government that we know our kids can't pay back so we can play stock market....just like we played housing when we made predatory loans to housing.

When Buffett and the Banks are all crooks......or crooked.....you know the game is about over.

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#3) On April 19, 2011 at 9:00 PM, rickdoom (98.64) wrote:

Indeed, some very nice yields on these BDCs:

ACAS    -
AINV    9.60%
AMTC    -
ARCC    8.20%
BKCC    12.80%
CSWC    0.80%
FSC    9.70%
FULL    -
GAIN    7.20%
GBDC    -
GLAD    7.30%
HRZN    5.50%
HTGC    8.50%
KCAP    9.30%
MAIN    8.40%
MCC    -
MCGC    9.30%
MVC    3.60%
NGPC    7.70%
PNNT    9.30%
PSEC    10.50%
RAND    -
SAR    2.09%
SLRC    9.80%
SUNS    -
TAXI    7.10%
TCAP    9.20%
TCRD    6.70%
TICC    8.70%
TINY    -

My favorite is PSEC.  I notice the yields are slowly coming back on the bank stocks as well, despite their rather dismal performance.  Hudson City Bancorp (HCBK) is starting to look interesting here with a 6%+ yield.

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#4) On April 20, 2011 at 1:23 AM, awallejr (83.84) wrote:

Well Alstry you are free to comment in my threads.  But this was a blog about looking for investment opportunities since afterall this is an investment site, but leave it to you to make a shoebox and just attack.

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#5) On April 20, 2011 at 1:26 AM, awallejr (83.84) wrote:

 rickdoom

Nice list there rick.  Yeah I like PSEC a lot too.  I own it in real life.  I like the fact that it is mainly involved in the energy field.  HTGC is interesting too since it is involved mainly in technology.

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#6) On April 21, 2011 at 5:50 PM, chk999 (99.97) wrote:

The one thing to be wary of on BDCs is that they usually have interest rate exposure on their borrowed funds. So an interest rate rise could cut into profits pretty fast.

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