Monday, September 10, 2012

Normalcy Returning to American Capital

Seeking Alpha just published a new Jaded Consumer article, Normalcy Returning to American Capital. Like the last Apple article, it is an Editor's Pick. Of 53 Jaded Consumer articles at Seeking Alpha, twelve have been designated Editor's Picks.

But to the article itself: the idea that American Capital is going under, to the destruction of investors' capital, looks fairly flimsy at this point. Yet, the NAV discount remains at about a third of the company's "fair value". In other words, when you buy $1.00 of stock, management invests a net of about $1.50 on your behalf.

Even reasonable returns start to look exciting when you multiply them like that. And the possibility that the NAV discount could narrow in the next several years as the loss carryforward is burned off and the incentive to avoid RIC status declines . . . well, after the runup from my post-crash purchase at $1.80, I'm still long.


Anonymous said...

Any new feelings about ACAS? I look forward to your comments regarding the recent news.

Jaded Consumer said...

The news about the repurchases are favorable (I've been bullish on below-NAV repurchase), and the announced investments are signs of "normal" investment activity for the firm. I need to write something longer, but the short version is that I like what I see so far.