My portfolios are getting a nice push higher, as evidenced by rising year-end capital flows back into the equity and debt markets. Each of the major themes that define my buy lists are playing out well and providing for exceptional high-yield payouts with long-term capital appreciation. And when you combine the holdings of both portfolios, it carries a current yield of 8.24% — and reflects what I believe are strong asset classes where our objective goals can be met.
Within my favorite themes, business development stocks Fifth Street Finance (NYSE:FSC), Triangle Capital (NYSE:TCAP), Hercules Technology Growth Capital (NASDAQ:HTGC) and the ETRACS 2X Wells Fargo BDC Index (NYSE:BDCL) are firming up nicely.
We’re still in a very favorable commercial lending environment where banks remain cautious, allowing business development companies (BDCs) to prosper by being the primary lender for hundreds of small- to medium-sized companies that are in hot growth industries.
I just love this business model for the individual investor. It allows passive investors to come alongside very smart money and make some whopping yields from being a silent corporate banker getting 15% returns. FSC, TCAP, HTGC, and BDCL all remain buys.
This past week, HTGC — the leading specialty finance company addressing the capital needs of technology-related venture capital and private equity-backed companies — reported third-quarter results. It reported steady growth and strong fundamentals, posting a 19.9% gain in total investment income.
The company created about $216 million in total commitments to new and existing portfolio companies. That’s a 160% jump from $83 million in the third quarter of 2010. Total investment assets surged to about $576.5 million year-over-year, a 41.5% increase. This BDC is perfect for income-seeking tech investors.
Another favorite of mine, TCAP, reported stellar numbers, beating Wall Street estimates by seven cents, representing a 15% upside surprise. It also bumped up its quarterly dividend payment to 47 cents from 44 cents per share. This is the third dividend increase in the past 12 months. Nice!
Total investment income was $16.2 million, which was a 65.7% increase over last year’s third quarter. The surge was thanks to new portfolio investments made during the past two years, which increased total loan interest.
Up on the Farm
The secular bull market for nitrogen fertilizer to meet global demand for corn also is unfolding according to plan: