Ares Capital's Yields Are Shrinking (Archive)
Shrinking yields, stretched valuations, and rising competition temper my previously bullish ARCC stance.
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
- My bullish stance on Ares Capital has outperformed the S&P 500, but I am adopting a more cautious stance after Q4 FY24 results.
- Ares Capital is growing its investment book by outperforming peers in deal activity, particularly through larger disbursements to top borrowers.
- Leading indicators suggest headwinds to net investment income in Q1 FY25 as yields and investment spreads shrink.
- Basel III Endgame deregulations for banks are a looming risk that can increase competition for ARCC and the broader BDC sector.
- ARCC's valuations seem stretched, as it is trading near the top of its historical valuation range. The bullish momentum on ARCC vs. the S&P 500 is also starting to slow down near monthly resistance.
Read the full article here.
Disclosures and Disclaimers
Past performance ≠ future results. Not investment advice. See full Disclaimer.
Comments ()