Prospect Capital Corp (NASDAQ:PSEC)

CAPS Rating: 4 out of 5

A financial services company that lends to and invests in middle market privately-held or thinly traded public companies.

Recs

6
Player Avatar lowellfield (96.37) Submitted: 6/2/2008 12:32:52 PM : Underperform Start Price: $7.22 PSEC Score: -11.69

Just read David Einhorn's book. Think this is a mini-Allied Capital. Not at all sure about the quality of their main investment, Gas Solutions Holdings, Inc., which they are supposedly planning to sell. If they find a buyer, I'll probably be in trouble here, but I think they're just propping up the valuation.

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Member Avatar ValueMonkey (93.20) Submitted: 9/25/2008 6:04:26 AM
Recs: 1

You've got this one all wrong. PSEC is not comparable to ALD or other broadly diversified BDCs. ALD actually offers a good pairs hedge for buyers of PSEC - try charting their relative performance over the past year. The quality of PSEC's portfolio, capital position, and management skill is evident when viewing the equity price performance relative to peers and the broader market during the recent correction. Firms with ready access to capital such as PSEC are well positioned to make excellent bargain investments in this period of significant dislocation, fear and overreaction.

Member Avatar ValueMonkey (93.20) Submitted: 10/1/2008 2:08:39 AM
Recs: 1

lowellfield - as a follow-up to my comment last week (9/25/08) that ALD would be a good pairs hedge (i.e., short) to owning a long position in PSEC, I'd like to point out that putting on this suggested trade last week at the time of my post would have yielded a net return of 26.5% as of market close today (9/30/08). The reason: ALD announced today that its largest portfolio company by cost, Ciena Capital, filed for bankruptcy protection. ALD has guaranteed $320MM in Ciena senior debt and provided $10MM in stand-by L/Cs. Ciena's bankruptcy will almost certainly result in taxable losses to ALD, which could significanly reduce ALD's earnings spillover. Such realizations will likely necessitate a reduction in ALD's per share dividend.

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