Ares Capital: It's Tough To Justify A Buy (Archive)
Fading rate tailwinds, sector headwinds and limited valuation cushion make ARCC difficult to buy.
This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.
Elevator Pitch
- Investment activity is yet to rebound materially. The Q2 FY23 improvement in gross commitments was small and not very broad-based.
- The argument that rising rates would benefit Ares Capital's net investment income is fading, as the chances of another rate hike are low.
- Sectoral headwinds on portfolio quality and degrading portfolio interest coverage metrics make me more cautious of Ares Capital's portfolio quality.
- Valuations are near long-term averages, reducing the margin of safety required to justify a buy.
- US M&A announcements is a key datapoint to watch as this would be a leading indicator of investment flows.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
Comments ()