Oxford Lane Capital Is In A Slump With No Signs Of Recovery (Archive)

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

• With an 18.86% forward dividend yield, Oxford Lane Capital may attract the interest of many income-focused investors. However, on a total shareholder return basis, I think it's poised to underperform:
• The company has been generating negative operating cash flows far in excess of its available cash and equivalent balances. This has forced it to raise funds, leading to a dilution of stakeholders.
• CLO warehouse investments are a leading indicator of future CLO issuances and investment activity. This has fallen sharply in recent quarters.
• OXLC's return profiles have shrunk as the fair value of its investments is underwater; 20% below cost value. Hence, NAVs have also shrunk.
• OXLC trades at a small premium to NAV. Given the weaker operational health, this reduces the margin of safety for buys. Technical analysis also indicates bearishness vs S&P500.

Read the full article here.