(SPECIAL GOLD ISSUE)
Featured Trades: (BUSINESS DEVELOPMENT COMPANIES),
(ARCC), (AINV), (GLAD)
3) Apollo Investments (AINV) Offers Some Pizzazz. I turned up an interesting sector during my interview with Adrian Day of Adrian Day Asset Management the other day (click here for the show) which you might want to add to your ‘buy on melt downs’ list. Business development companies prosper in this difficult environment and are able to pay incredibly high dividends by charging extortionate interest rates to small businesses which the banks have abandoned. Aggressive Ares Capital (ARCC) and Apollo Investments (AINV) currently pay an 11% dividend, while more conservative Gladstone Capital (GLAD) delivers 8%. For their efforts these companies get a collection of high yielding senior and junior debt and equity. It all sounds like legalized loan sharking to me. While they faced a near death experience when credit completely froze up in 2008-09, a repeat is not expected in the next down cycle. These firms’ stocks sell for single digit multiples, and pass 95% of their net operating income on to shareholders. The sector has prospered in recessions going all the way back to the sixties. Economic recoveries then bring a revaluation of the debt and equities they buy during these downturns. Check it out.