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# Ares Capital: It's Tough To Justify A Buy (Archive)
- URL: https://www.huntingalphas.com/ares-capital-its-tough-to-justify-a-buy-archive-copy/
- Published: 2023-08-01T03:38:00.000Z
- Updated: 2026-02-27T05:32:41.000Z
- Description: Fading rate tailwinds, sector headwinds and limited valuation cushion make ARCC difficult to buy.
- Author: Vish (Hunting Alphas)
- Tags: 5-Minute Pitches, #noindex, Archive, #sa-origin, ARCC, Financials

*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](https://seekingalpha.com/article/4622003-ares-capital-q2-earnings-tough-to-justify-buy-rating-downgrade?ref=huntingalphas.com).

#### Disclosures and Disclaimers

**Past performance ≠ future results. Not investment advice. See* [**full Disclaimer*](https://www.huntingalphas.com/disclaimer/)**.*