Ares Capital: I'm Not Bearish Anymore But Still Have Concerns (Archive)
Strong deal flow, AI‑exposed software book, rich relative valuation keep me Neutral/Hold on ARCC.
This 5-Minute Pitch was originally published on Seeking Alpha. It is shared here to showcase my work and track record. 5-Minute Pitches published only this site will not be disseminated anywhere else and will remain behind a paywall, accessible only to Hunter Tier members.
Elevator Pitch
- Ares Capital’s strong recent deal flow and diversified commitments position it for potential net investment income growth from currently stagnant levels.
- Nearly a quarter of Ares Capital’s $29.5B portfolio is in software, and its backlog and pipeline suggest this software exposure could rise further.
- Growing software exposure increases Ares Capital’s vulnerability to AI-driven disruption, especially if agents compress pricing power for traditional software business models.
- Ares Capital trades at a sizable 1-yr fwd PE to BDC peers that is well above its long-term median relative valuation.
- Ares Capital sits on major monthly technical support with some signs of stabilization, but convincing buyer strength has not yet emerged.
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