OCSL - Oaktree Specialty: Fear Creates 11%-Yielding Buying Opportunity (Rating Upgrade)
2024-02-11 08:01:24 ET
Summary
- Oaktree Specialty Lending's shares dropped due to a rise in the non-accrual percentage, creating a buying opportunity.
- The BDC's focus on senior secured loans and ability to work out problematic loan situations mitigate the impact of non-accruals.
- Oaktree Specialty Lending's actual financial performance was strong, with growth in interest income and net investment income.
- The 11% yield is still covered by NII and OCSL stock is now trading near its longer-term P/NAV ratio.
Oaktree Specialty Lending ( OCSL ) suffered fear-driven selling pressure after the BDC’s lending performance deteriorated in the December quarter. A non-characteristic rise in the non-accrual percentage caused Oaktree Specialty Lending to slide from $21.50 to $19.00 after earnings, but shares have stabilized at $19.68 now and a bottom formation is materializing. I believe the drop-off constitutes a unique buying opportunity for dividend investors as the market’s reaction to the change in the non-accrual percentage seems excessive. The increase in non-accruals caused fears that Oaktree Specialty Lending may have to cut its dividend which I don’t believe will happen. With shares trading down to a P/NAV ratio of 1.0X, I believe the risk profile is very attractive!...
Oaktree Specialty: Fear Creates 11%-Yielding Buying Opportunity (Rating Upgrade)