Mar 29, 2025 8 min read Multiple BDCs

BDC Common Stocks Market Recap: Week Ended March 28, 2025 - ANNOTATED

The BDC sector has been performing price-wise much better than the major indices. Nonetheless, we are not keen on buying any BDC common stocks right now as we explain at length.

March 29, 2025

Re-Printed From The BDC Reporter

BDC COMMON STOCKS

Week 13

For the week, the S&P (SP500) retreated -1.5%, while the tech-heavy Nasdaq Composite (COMP:IND) slid -2.6%. The blue-chip Dow (DJI) fell -1.0%.
seeking alpha-wall street breakfast – march 29, 2025

Unmistakable

Markets do not retreat in an orderly fashion. Prices do not drop by the same percentage every during a pull-back.

Yet, there’s no question that since February 19, 2025 when the S&P 500 closed at 6,144.15 a retreat is underway.

On Friday March 28, 2025, the S&P 500 was down to 5,580.94., or (9.2%) – very close to a “correction”.

Early in the week, investors spirits improved but, by the end, the S&P experienced its second worst day of the year.

Rinse and repeat.

Thanks to a good start to the year, the most watched index is down only (5.1%) in price terms and (4.8%) on a total return basis.

Not So Bad

The BDC sector – as measured by the price performance of its exchange traded fund with the ticker BIZD – continues to outshine the S&P 500 and all the major indices.

This week, despite a big dip on Friday, BIZD was up 0.9% to $16.86.

Since BIZD’s own peak on February 19, its price has dropped (5.4%).

That’s not nothing but a good deal less bad than the S&P 500.

Getting Into The Details

This week an equal number of BDCs moved up in price as moved down.

However, only two BDCs increased in price by more than 3.0%, while twice as many fell greater than (3.0%).

Saratoga Investment (SAR) – for some reason – has caught investors fancy and moved up 3.5%.

BlackRock TCP Capital (TCPC) – about which we’ve just written a long credit review article – moved up 3.4% as – once again – some hardy souls bet that a price bottom has been reached.

As this chart shows, TCPC’s stock price has dropped in half since the spring of 2021, but has also repeatedly moved up, only to fall again.

TCPC closed on Friday at $7.99. Undoubtedly, TCPC is selling at a very low multiple: 6.0x., well below the industry average of 8.6x. The price to NAVPS is 87%. Going by the latest regular dividend - $0.25, just reduced - and adding the $0.04 special and the half promise on TCPC's latest CC of another $0.04 per share coming - the current yield is 13.5%. Just getting the stock to trade at the industry PE average would raise the stock price to $11.54, or to a 44% gain. Clearly, there's a potential big gain to be had if TCPC could just meet the lowered expectations investors have for the stock after 3 years of dreadful results. No wonder value buyers are circling. Unfortunately, our credit research into TCPC proved to be overwhelmingly negative. Not only has the BDC racked up massive losses year after year, but the recent pace of deterioration has been accelerating. Yes, virtually all the underperforming companies on the books are now known and most of them are not generating any income but there is still plenty of room for further write-downs and some more income loss. Only one company in this group out of 15 is trending upward in the IVQ 2024 over the IIIQ 2024 level. The BDC Credit Reporter estimates further losses might amount to a further (14%) drop in NAVPS. We have increased our NAVPS loss estimate from (4%) to (10%) for 2025. If we're right, by the end of the year TCPC's NAVPS would be down (40%) since the end of 2019. For us, that's just too much downside risk even if the upside - on paper - is unusually exciting. We've updated the Expected Return Table with our latest projections and keeping the analysts 2025 NIIPS estimate of $1.34, but we're staying away from the stock even now as the book total return is only 3.5%.

Downers

The big droppers – in percentage price terms – were Portman Ridge (PTMN), down (6.2%); followed by newly public MSC Investment (MSIF) off by (4.2%), with CION Investment (CION) down (3.6%) and Palmer Square (PSBD) (3.1%) lower.

Not surprisingly, given PTMN's weak IVQ 2024 results, the analysts have chopped down their expectations for the BDC's 2025 NIIPS. 90 days ago the consensus was for $2.61 a share. Even 7 days ago - according to Yahoo Finance - the number was even higher: $2.63. Now, though, PTMN is expected to book recurring earnings of $2.43. We've updated the Expected Return Table. The BDC does offer - even at our reduced 2025 payout of $2.20 - a very high dividend. However, if you take into account our assumption that the BDC's NAVPS will drop by (6.0%), the book total return is not good enough for us to recommend the stock except to the most speculative investors.

In terms of 52 highs and lows, by our count there was only one – PTMN – which reached a 52 week nadir.

Not Much

There was little in the way of market-moving BDC-specific news.

At long last, the IVQ 2024 BDC earnings season came to an end with Investcorp Credit Management’s (ICMB) results.

Not unexpectedly, ICMB did not perform all that well. Most notably, the BDC’s Net Asset Value Per Share (NAVPS) dropped by (2.9%).

Worryingly for the BDC’s shareholders, Net Investment Income Per Share (NIIPS) only came to $0.06 but the quarterly dividend was $0.12.

In the next two quarters, the analysts are projecting ICMB’s NIIPS will only reach $0.11, so you see the problem ahead…

We've updated the analyst earnings consensus for 2025 as ICMB's prospects have diminished. Now, the 2025 NIIPS is expected to be $0.43, down from $0.49. As a result, we've also trimmed the payout expectation in the Expected Return Table to $0.39. We just don't see how the BDC can continue to pay the $0.12 a quarter that has been paid or announced for the last 3 quarters, including the IQ 2025.

Getting Bigger

As expected, the shareholders of both Carlyle’s BDCs – the public one (CGBD) and the non-traded one – Carlyle Secured Lending III – agreed to merge.

The shareholders are promised “strategic benefits” and that the combination will “create long-term value through increased portfolio scale and efficiency”.

That’s in the future. Right now CGBD is trading at $16.72 a share – and as this chart shows – is well off in price in 2025:

Yahoo Finance: CGBD Stock Price 2025 Year-To-Date

The drop-off in CGBD's stock price is intriguing because the BDC's fundamentals have been good in recent years. Even though recurring earnings are projected to drop (13%) in 2025 and the payout by (10%), CGBD might make a Best Idea shortly. All those new CGBD shares issued to the Carlyle Secured Lending III shareholders as part of the merger might result in an even lower price - especially in the current environment. We will be keeping a close eye to see if we can nab the stock at an even lower price than $16.72.

Snapshot

We are now a neat one quarter of the way into a tempestuous 2025 and BIZD is still in the black YTD: 1.4% in price terms.

The S&P BDC Index – calculated using a different methodology than BIZD and including all dividends received so far – is up 1.2%.

As we’ve noted above, BDCs are doing way better than the S&P 500, down (5.1%) in price terms and (4.8%) on a total return basis.

At this point in 2025, 22 BDCs are up in price and 24 are down.

The number of BDCs trading at or above their NAVPS is 15. At the end of 2024 this metric amounted to 13 and reached a high of 20.

4 BDCs are trading within 5% of their 52 week highs and 9 are within 5% of their 52 week lows.

Here are the ten top BDCs in terms of percentage price increase in these first 13 weeks - see the last column:

These are the ten”worst” price performers:

Where We’re Going

Same Old

As usual, the future is a mystery and no more so than right now with uncertainty writ large in the interest rate, economic and political environment – all of which are increasingly inter-related.

Making matters even more difficult to divine, much of the confusion that has become our daily bread, is of very recent origin.

As a result, there has been very little observable impact on the BDCs and their portfolio companies to evaluate.

In addition, we don’t like to take dire forecasts from our friends in the dismal science too seriously nor the endless comments coming from the Fed governors, each of whom seems to have a different take when being interviewed but seem to vote almost unanimously when they gather together.

One can find in the zeitgeist whatever one’s own pre-conceptions might be, a dangerous sort of echo chamber.

This week, we noted that a Deutsche Bank survey put the chances of a U.S. recession “as approaching 50%”. (The actual number was 43%). Fitch cut both its world and U.S. economic growth forecasts, while Atlanta Federal Reserve President Raphael Bostic “now sees the Fed cutting its benchmark interest rate only a quarter of a percentage point by the end of this year”. That’s in contrast with the 2 or 3 cuts most everyone else projects.

No Thanks

All the above seems credible and in line with our own instincts but the data is not clear cut enough to rely on so we remain agnostic. Or, put another way, we have no idea what tomorrow and the day after might bring.

All we’ll say is that the evidence suggests BDC investors have largely avoided panicking in recent weeks and a fundamental optimism about the outlook for credit – and the still very high yields to be harvested – remains.

At times of market stress, we like to see how investor favorites perform.

Close By

Ares Capital (ARCC) – for example – is trading (7%) off its 52 week high and 14% above its 52 week low.

Main Street Capital (MAIN) is (11%) off the high but 26% above the low.

Both trade well above book, especially MAIN.

We interpret this as meaning that investors may have taken some money off the table – both BDCs were recently breaking all-time price records – but have not gone off very far.

There is “no blood in the streets” – i.e. no sense of panic, just a quiet resignation and a wait-and-see attitude.

That’s exactly what we are going to do.

Although we are considering a few investment ideas, most notably CGBD as discussed above, the uncertain investment environment is essentially keeping us on the sidelines for yet another week. Last Friday, as BIZD dropped (1.43%) we felt validated while earlier in the week as BDC prices moved up we were full of self doubt. However, the underlying reason for being on the sidelines is a simple one: There is much more potential price downside in this environment - even now - than there is upside. The BDC sector has been in rally mode since the fall of 2022 and when this current crisis began on February 19, 2025, BIZD was trading at - more or less - its highest level since 2017. How much higher could we have gone even if we'd never heard the word tariff? How far could we drop if we do actually get the Recession that has been promised to us on and off ever since the last one 15 years ago? This is old fashioned Asymmetric Risk Reward. We acknowledge, though, that investors - ourselves included - feel compelled to "do something". However, right now our best advice - and we expect to have no regrets whatever the BDC market does in the days ahead - is to embrace doing nothing.

You might also like...

Updates To the Expected Return Table

BDC Common Stocks Market Recap: Week Ended June 6, 2025 - ANNOTATED

BDC Investment Portfolio: Performance Through May 2025

BDC Common Stocks Market Recap: Week Ended May 30, 2025 - ANNOTATED

BDC Common Stocks Market Recap: Week Ended May 23, 2025 - ANNOTATED

Popular tags