Friday Addition Edition Addition- Business Development Companies with a PE disposition

Let's talk about business development companies today. For the record, I love BDC's. They are banks on steroids with a lot less regulation.

BDC’s have been around since an amendment to the 40-act bringing them into being was passed back in 1980. A BDC must invest at least 70% of its assets in nonpublic US companies with a market value of less than $250M. 90% of cash flows have to be paid out to shareholders to avoid taxation at the corporate level.

BDC's can invest in any level of a company's capital structure, but debt has been the most popular strategy. From experience, I can tell you that when raising money from John Q. Public, a fat dividend makes the sales pitch a lot easier.

BDC's allow individual investors to invest in small to midsize private companies, much like private equity and venture capital funds are able to do. Often the loans they make will have some form of equity participation so we can collect fat interest checks and have some exposure to the potential upside of the business.

BDC's came into their own in the aftermath of the Great Financial Crisis of 2008-2009. Banks decided-or in many cases, were forced to -step away from riskier types of corporate lending, especially in the smaller company segment of the market. Banks were out of the buyout, and early-stage lending to growth businesses and BDC's stepped up to fill that void.

2021 should be a strong year for well-managed BDC's. The economy should continue to open, and we should see some of the service businesses begin to open as more of us are vaccinated. Margins should move higher as the fed keeps a lid on short rates and long rates drift higher as the economy recovers.

Already in 2021, we have seen ...

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CEF Activism and Takeover Artists

I had a discussion this morning about the future direction of the stock market+ with an old friend. He is quite bullish based on the hope for a $1.9 trillion stimulus package and an infrastructure bill's eventual passing. I get ...

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Friday Addition Edition CEF Activism and Takeover Artists

I had a discussion this morning about the future direction of the stock market+ with an old friend. He is quite bullish based on the hope for a $1.9 trillion stimulus package and an infrastructure bill's eventual passing. I get ...

Read More
Comments

Friday Edition-Buying High

It has been an interesting week, to say the least. The whole GameStop (GME), Redditt, and Robinhood saga has been one of the most fascinating events I have ever seen. The WallStreetBets Redditt group has gone from 1.8 million members ...

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Friday Addition Edition- Buying High

It has been an interesting week, to say the least. The whole GameStop (GME), Redditt, and Robinhood saga has been one of the most fascinating events I have ever seen. The WallStreetBets Redditt group has gone from 1.8 million members ...

Read More
Comments

Friday Edition-Rational Liquidation Value

Today I am going to share a method that one of the two best ways for individual investors to make money in stocks. I am talking big money, money that causes George Soros to blush with envy. If you put ...

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Friday Addition Edition-Rational Liquidation Value

Today I am going to share a method that one of the two best ways for individual investors to make money in stocks. I am talking big money, money that causes George Soros to blush with envy. If you put ...

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Friday Edition looks at 2021 bank M&A

For today's Friday Addition Edition, I am going to stay with the banks. I got a copy of the full KBW Bank M&A report, and I want to share the information and ideas with you. KBW is one of the ...

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Friday Addition M&A Edition

For today's Friday Addition Edition, I am going to stay with the banks. I got a copy of the full KBW Bank M&A report, and I want to share the information and ideas with you. KBW is one of the ...

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Friday Edition

We skipped the Friday addition for the Christmas and New Years Holiday, but we are back with some ideas for you to consider outside just your bank stock portfolio.

I have been focusing a lot on income-generating investments in these ...

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Friday Addition Edition

We skipped the Friday addition for the Christmas and New Years Holiday, but we are back with some ideas for you to consider outside just your bank stock portfolio.

I have been focusing a lot on income-generating investments in these ...

Read More
Comments

Friday Addition Edition

If you have been following me for any length of time, you know I spend a lot of time researching and modeling various investment ideas and strategies. It interesting, often entertaining, and it keeps me off the streets.

I probably ...

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