ARCC - Ares Capital: A High-Rate Play With Profound Yields
2024-02-02 02:29:46 ET
Summary
- Ares Capital is the largest business development company with a portfolio of over $11.5 billion, consisting mostly of senior secured loans.
- High interest rates in 2023 led to record revenues for Ares Capital, with a 22% YoY growth and impressive margins.
- Despite strong performance, the stock price only grew 4% in 2023, below the S&P 500 return of 24%.
- Cuts are looking more distant and less drastic than expected, with the Fed likely to hold rates higher for longer.
- Ares Capital stock seems relatively undervalued when compared to its peers.
Investment Thesis
Ares Capital (ARCC) is a business development company ((BDC)) that specializes in buying debt and equity of private middle market companies. As of Q3 of 2023, Ares Capital had a portfolio of over $21.9 billion , consisting of ~66% senior secured loans. Ares Capital is the largest business development company by market capitalization, with a current market cap of over $11.5 billion....
Ares Capital: A High-Rate Play With Profound Yields