Out Fox The $treet

Small Cap Insight To investors frustrated with being locked out of the pre-IPO market, business development corporations (BDC) such as Firsthand Technology Value Fund ( SVVC ) offered potential for participating in the large IPO gains of hot stocks. The reality hasn't reached the hype from back in 2012 when the Facebook ( FB ) IPO blew up. Now over a year later and with Facebook soaring, one might expect the stock to offer huge upside potential, but one glaring issue exists. The company is a publicly traded venture capital fund that invests in technology and cleantech companies prior to an IPO. It is run by well-known tech investor Kevin Landis that charges management fees of 2% of gross assets and 20% of capital gains. The company competes for investments with venture capitalists, accredited investors and other public funds such as GSV Capital ( GSVC ) and Keating Capital ( KIPO ) . Read the full article at Seeking Alpha. Disclosure: Long GSVC. Please revie...

After a lot of hype about the single-family rental market, the Silver Bay Realty Trust ( SBY ) IPO turned into a major bust. The REIT went public back in December at $18.50 and quickly shot up to over $22, but any investors buying that hype have felt nothing but pain in 2013. In fact, the stock now trades below NAV near all-time lows around $15.50. Could it finally be time to buy the REIT? Silver Bay focuses on acquiring, leasing, and maintaining a portfolio of single-family homes in select attractive markets in the U.S. It plans to operate under a REIT where substantially all of future income is returned to shareholders. For investors that follow Stone Fox Capital, a big warning was issued when the REIT started trading due to the expected weak financials and lack of an initial dividend. In the early days, investors were confusing bargain housing prices with operating profits Disclosure: No positions mentioned. Please review the disclaimer page for more details....

While Prospect Capital Corporation ( PSEC ) continues to report record originations, the company is failing to pull those numbers to the net investment income (NII) line. Not only did the last quarter show essentially flat NII, but also it occurred on a substantially higher share base. Prospect Capital is a leading provider of flexible private debt and equity capital to sponsor-owned and non-sponsor-owned middle market companies in the United States and Canada. It trades as a closed-end investment company that has elected to be treated as a business development company ( BDC ) under the Investment Company Act of 1940. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Another quarter and another major buyback by American Capital, Ltd ( ACAS ). The company announced it has now repurchased 61.4M shares since shifting from paying dividends back in Q3 2011. The total buyback has amounted to $623M over the last 7 quarters at an average discount to a continuously soaring NAV of nearly 40%. Nonetheless, the stock continues to trade at a substantial discount even after demonstrating to the market every quarter that it has the financial ability to spend that much cash. American Capital is a private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products. American Capital manages $18.6 billion of assets, including assets on its balance sheet and fee earning assets under management by affiliated managers, with $117 billion of total assets under manageme...

After the trading week closed on Thursday, March 28, Prospect Capital Corporation ( PSEC ) made a surprising announcement that the company had originated a record $800 million during the March quarter. The surprise comes after the company claimed in early February that the originations for Q1 were a mediocre $141 million almost halfway into the quarter. The market didn't actually expect much following the year-end push to exit businesses to beat the tax deadline. Prospect Capital is a leading provider of flexible private debt and equity capital to sponsor-owned and non-sponsor-owned middle market companies in the United States and Canada. It trades as a closed-end investment company that has elected to be treated as a business development company (BDC) under the Investment Company Act of 1940. The origination pace, while bullish, does bring into play a previous concern about another equity raise, as a surge in deals were the only reason equity would be needed. C...

With the recent deal where Hercules Technology Growth Capital ( HTGC ) lent up to $30M to OCZ Technology ( OCZ ) for a load of warrants, investors might be better off investing with the BDC that got the sweet deal. The temptation in this scenario is to buy the low-priced technology stock hoping for a large rebound. With the BDC sector heating up, as investors are attracted to the high yields, Hercules Tech Growth Capital has mostly flown under the radar. The company provides a solid 8% yield while the investment in a public company provides more visibility than the normal unknown private firm. It focuses on providing senior secured loans to venture capital-backed companies in technology-related markets. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

With the market craving yields, it is amazing that several business development stocks can still yield around 10%. Both Solar Capital ( SLRC ) and TICC Capital ( TICC ) have had yields around 10% for a considerable amount of time. While Prospect Capital ( PSEC ) remains a favorite (see Prospect Capital: Prospecting For Even Higher Dividends ) with a yield of nearly 12%, the question is whether either of these less followed BDCs provide a better investment? Solar Capital The company operates as a closed-end investment company that invests primarily in leveraged, middle market companies in the form of senior secured loans, mezzanine loans, and equity securities. The stock has a market cap of $1.1B and currently yields 9.7%. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

The business development companies ((BDCs)) continue to garner more investor attention as the access to a different investment class and high yields become ever more attractive. After highlighting Prospect Capital Corporation (PSEC) a few weeks back, Fifth Street Finance Corp. (FSC) now garners our attention with a yield above 10%. Fifth Street Finance is a specialty finance company that lends to and invests in small and mid-sized companies in connection with investments by private equity sponsors. The company provides full debt structure financing solutions including: first lien, second lien, mezzanine, and one-stop. It trades as a closed-end investment company that has elected to be treated as a business development company (BDC) under the Investment Company Act of 1940. Though the company that went public in 2008 has historically not grown Net Asset Value (NAV), Fifth Street recently reported record transaction volumes for the December quarter. Read the full article at Seeking ...

In a market that can't get enough yield, it's interesting that a dividend grower can yield nearly 12%. In fact, Prospect Capital Corporation (PSEC) has consistently increased the monthly dividend ever since the bottom of the financial crisis impact in 2010. Prospect Capital is a leading provider of flexible private debt and equity capital to sponsor-owned and non-sponsor-owned middle market companies in the United States and Canada. It trades as a closed-end investment company that has elected to be treated as a business development company ((BDC)) under the Investment Company Act of 1940. Read the full article at Seeking Alpha. Disclosure: Long ACAS. Please review the disclaimer page for more details. 

The market remains so uninterested in buybacks that a company can continuously buy its own stock at a substantial discount to net asset value [NAV]. American Capital, Ltd (ACAS) is a prime example, having recently completed an 8.8M share buyback in Q4 that will again help boost the NAV. The company bought the stock at an average price of $11.72, for a total cost of $103M. In the previous quarter, substantial purchases below book value added $0.23 to NAV. The NAV stood at $17.39 prior to the quarter's start, so it undoubtedly added to that value. American Capital is a private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products. American Capital manages $17.2 billion of assets, including assets on its balance sheet and fee earning assets under management by affiliated managers, with $1...

In the past, we have been very critical of the IPO process. In 2011, the Chinese technology firms soared 100% above the IPO range and left initial public investors with considerable losses in a few months. In 2012, the social media stocks blew up after investors in the public markets paid considerably above the IPO price. In both cases, the IPO process signaled the top in these hot sectors leaving the public holding the bag as the insiders exited the firms. Now GSV Capital Corp (GSVC) allows regular investors to participate in the potential insane gains of the IPO process. Instead of needing millions of investment capital, GSV allows investors to "hire" a management team to scout out the top private investments and diversify the risk via 40+ companies. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

Just about every company paying a dividend yield has had extremely strong stock gains over the last year. Main Street Capital Corporation (MAIN) has been no exception to this rule. Though the company continues to raise the dividend, the current yield has dropped to 6%. The company is a principal investment firm that primarily provides long-term debt and equity capital to lower middle market companies and debt capital to middle market companies. Now that the company has gained 69% over the last year, the question remains whether investing in a BDC that only pays a 6% dividend is worth it. The company has a primary focus in the lower middle market that has a favorable investment opportunity as fewer lenders have competitive offerings for this sector after the financial crisis. Read the full article at Seeking Alpha. Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

With high yield in vogue these days, Ares Capital (ARCC) is worth a look even after a big gain this year. Back in August at the time of the Q2 earnings release, the company announced an increased dividend to $0.38 plus a bonus dividend of $0.05. Counting only the normal dividend, the stock currently yields 8.7%. The company is a business development company (BDC) that operates as a leading specialty finance company that provides one-stop financing solutions to U.S. middle market companies and private equity sponsors. The company originates and invests in senior secured loans, mezzanine debt and, to a lesser extent, equity investments through its national direct origination platform. Ares Capital competes against companies like American Capital, Ltd (ACAS) , KKR Financial Holdings LLC (KFN) , and Main Street Capital Corp. (MAIN) . All of these stocks have had huge gains in the last year, yet all but American Capital provide still compelling dividends. Read the full article at Seekin...

The market has become so obsessed with dividends that a company buying stock at a 40% discount to net asset value (NAV) is often questioned for not paying dividends instead. In fact, American Capital, Ltd. (ACAS) recently announced completing an 11.4M share buyback in Q3 that will undoubtedly be questioned on the next earnings call. The company bought the stock at an average price of $10.99, for a total cost of $125M. Considering the substantial purchases below book value, the transactions will add over $0.20 to NAV. A smaller buyback in Q2 at a slightly higher discount to NAV added $0.20. American Capital is a private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites, and manages investments in middle market private equity, leveraged finance, real estate and structured products. American Capital manages $17.2 billion of assets, including assets on its balance sheet and fee earning assets under mana...