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BDC Common Stocks Market Recap: Week Ended June 22, 2018

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BDC COMMON STOCKS

Puzzling

If you just take the headline number – the closing price of the UBS Exchange Traded Note with the ticker BDCS – this was a flattish week.

BDCS closed at $20.37, just one penny up from the week before.

Darkening

However, the other data points we look at suggest a more somber picture.

Only 11 BDCs out of the 46 we track were up on the week. The rest were flat or down.

In fact, not one BDC was up 3.0% or more, the BDC Reporter’s self imposed threshold for further discussion.

On the other hand, there were 5 BDCs down (3.0%) or more.

Naming Tickers

Inquiring minds will want to know who: WHF (4.2%), OFS (3.8%), HRZN (3.5%), OHAI (3.2%) and GARS (3.1%).

However, there was no dramatic news about any of these Losers Of The Week to explain these price drops.

Flagging

Moreover, the momentum numbers are suggesting a slowdown in investor enthusiasm.

Now there are 27 BDCs trading over their 50 Day Moving Average from 35 last week and 41 two weeks ago.

Using the 200 Day Moving Average as another indicator, only a minority of BDCs (17) are in the green.

The other 29 are trading below the 200 Day Moving Average.

Bottoms Up

The BDC Reporter’s own favorite data point: the number of BDCs trading within 5% of their 52 Week Low jumped to 9 from 5.

The number within 5% of their 52 Week High has dropped in half from 6 to 3.

Index Indicator

We also sought guidance from the Wells Fargo BDC Index.

As the chart shows, the week was flattish:

Pulling Back

Looking over a slightly longer period, though, both the Wells Fargo Index and other data points suggest a softening market.

Over 1 months the WF Index is up on a Total Return basis just 0.64%.

(YTD – as we approach the midpoint of this historic year – is an OK 3.02%).

Using Seeking Alpha‘s 4 Week data, only 18 BDCs are up in price over that period of time.

(12 are in the green over a 52 Week timeframe).

Looking at the 3 top performers over that longer period (GAIN, OHAI, OCSL) the price increases don’t seem actuated by market enthusiasm about exogenous events such as the Small Business Credit Availability Act.

Instead, these increases appear to be based on good old fashioned better fundamental performance.

Outlook

In our view, the bloom is off the rose for the BDC rally that began May 2.

We are still up 5.2% over that period.

Not helping are unsettled macro conditions.

Nothing is written in stone.

We’ve seen the BDC Sector get a second or third breath in the past, and continue its upward trajectory.

However, the weight of the data does not give us great confidence.

Summer time blues coming up ?

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