Did you ever wonder which of the 43 public BDCs out there to invest in - all involved in lending, but each different in many ways ? There are BDCs focused on large cap borrowers and those targeting companies with tiny EBITDAs - and every other segment in-between. There are BDCs whose entire portfolio consists (almost) entirely of loans and those who not only offer debt, but also large slugs of equity stakes. Or BDCs dedicated to financing acquisitions and add-ons initiated by private equity sponsors and those who go directly to borrowers for a host of other purposes. There are BDCs who have leveraged their own balance sheets very close to their regulatory limits, and those that keep a wide berth from the 2:1 debt to equity allowed under BDC rules. There are BDCs that have been publicly traded for nearly twenty years and those who have been around twenty months, or less. Some BDCs have many billion dollars under management while some others are a fraction of that size.
Also, price volatility is a prominent feature of BDC investing. In a given year most every BDC will trade in a 25%-35% price range, even when paying out an unchanged distribution. One wants to buy low and sell high, but how can you tell when which is which ?
We've struggled with these questions as a BDC investor for two decades. As a long term investor, we want to identify the BDCs with the best dividend payout prospects, but also at the right price. Our solution ?
Expected Return Table
All these calculations for every BDC - which represent hundreds of hours of analytical work, much of which is contained in our sister publication the BDC Reporter - are contained in the Expected Return Table. As you might imagine, as BDC prices change and new information come in, the expected Total Return changes from day to day, and even minute to minute, as the model operates in real-time. You'll be surprised how much potential returns can change over time and vary between the BDCs involved.
The highest return may not be your first choice - or even second choice - but the Expected Return Table should provide an excellent starting off point for any would-be investor.
We don't just make projections. Every time we make a change or when some market moving news occurs, we write an Update for our readers. Sometimes we amend the Table, other timers not - and we explain why.
Every week-end, we sum up the week's developments in what we call a Market Snapshot article and discuss how BDC prices have been performing and what some of the best opportunities are at the moment.
Periodically - but not tied to any schedule - we will point to a Best Idea - a BDC that offers unusually attractive value over the long term. We'll explain why, run the numbers and even purchase the stock in question on the following Monday for our own Best Ideas Portfolio. The idea is to demonstrate that we put our money where our mouth is, and for readers to see how these selections play out over time.