The Artificial intelligence revolution is still just getting started, and some industries are set to benefit more than others. For example, the AI-powered marketing software company we review in this report has a lot of momentum right now, including rapidly rising revnues, a large market opportunity, competitive advantages, a compelling new mobile solution, healthy financials, solid leadership and new tailwinds from lower interest rates. After reviewing the company, including opportunities and risks, we conclude with our strong opinion on investing.
Despite Big Risks, 14.2% Yield BDC Worth Considering
BDCs are often an income-investor favorite because of their large dividend yields. And the BDC we review in this report stands out for its 14.2% yield (which is larger than many peers). However, the higher yield comes with higher risks (for example, net investment income just barely matched the dividend last quarter and the 0.88x price-to-book value suggests the market may be beginning to price in a dividend cut—especially considering 85% of their investments are floating rate while they also have a signifcant amount of fixed rate debts of their own). In this report, we reveiw the BDC and conclude with our opinion on investing.
New Purchase: Disciplined Growth Portfolio
Quick Note: We have added back shares of this “fallen angel” AI stock mainly because the risk-reward and valuation metrics appear very compelling, despite high uncertainty and high short sales. The share price could get worse before it gets better, but if you like to buy profitable high-growth businesses with a long runway for growth, this one is compelling.
Big-Yield BDC Comps: ARCC, MAIN, OBDC, OCSL
A lot of income-focused investors are attracted to BDCs for their large dividend yields. However, not all BDCs are created equally. In the following table you will see comparative data for top BDCs, including the percent of investments that have fixed-versus-floating rates, the percent of debt they have that is fixed-versus-floating rate, price-to-book value, current dividend yields and the percent of first lien loans they have made as investments.
Blue Owl Merger: BDC Storm Clouds Ahead, 11.9% Yield
The recently announced merger between Blue Owl’s two publicly-traded BDCs (OBDC) and (OBDE) is a warning sign that investors should heed. In particular, the combination between OBDC (flagship) with OBDE (slightly-more-conservative) is a precautionary step. Here is how we expect it to play out for Blue Owl and for the BDC industry in general.
High Income NOW Portfolio Update
High-Income NOW securities have performed very well over the last 1-2 months as they often do during bouts of market volatility (as we have seen for stocks in general over the last 1-2 months). The High-Income NOW Portfolio and Top 10 Tear Sheet have been updated, with no major changes, but some important commentary below.
Thermal Barriers Company: Growth Accelerating on Government Regs, OEM Wins
Quick Note: High-Growth Stock Screener
100 Big-Yield CEFs, Compared
PDI: The Case for Bond CEFs, PIMCO Leads
If you have been invested heavily in the stock market for the last few years, congrats—you’ve made a lot of money. But if your stage in life suggests now is the time to “de-risk,” your options might seem limited. In particular, bonds (the traditonal de-risking methodology) currently offer low yields (for example Vanguard’s popular bond ETF (BND) only yields 3.4%) and rates may be about to go even lower (i.e. the fed seems ready to cut). One bond alternative that offers several unique advantages is PIMCO’s 13.9% yield Dynamic Income Fund (PDI). In this report, we review the advantages of bond closed-end funds with a detailed focus on PDI. We conclude with our strong opinion on current bond CEF opportunities and PDI in particular.
Members Mailbag: PAXS and ROC
Members Mailbag (Quick Note): If you are familiar with PIMCO Bond Funds, you know (1) they are popular for providing big monthly income payements to investors, but (2) Few people actually want to know “How the sausage is made.” Here is a quick question from a member about “Return of Capital” (“ROC”) on PIMCO’s 11.5% yield PAXS, followed by a reply from me. Hopefully, it’s a helpful piece of info for you to “stir into the pot” as you manage your investments.
50+ Top Semiconductor Stocks, Compared
Quick Note: Sharing updated data on 50+ top semiconductor stocks (such as Nvidia, Broadcom and AMD). The data is sorted by market cap, and you can see performance has been quite weak over the last month (despite strong analyst ratings, which are also included). Hopefully this data is helpful as you research ideas.
Nvidia: Too Much, Too High
If you are like just about every single person I talk to, you own shares of Nvidia. And you probably love to tell your story of how you got in early, or how you should have bought more. But what about Nvidia's valuation? And what about your "position sizing" of Nvidia within your aggregate investment portfolio? After reviewing Nvidia's business, growth trajectory and risks, we discuss its current valuation and prudent position sizing within your personal investment portfolio. We conclude with our strong opinion about owning Nvidia shares ahead of the upcoming earnings announcement.
Top Growth Stocks (Updated): Top 10 Tear Sheet + Disciplined Growth Portfolio
Our Top 10 Growth Stocks Tear Sheet has been updated. And so has our complete Disciplined Growth Portfolio. There have been two main new purchases, and one prominent complete sale (as well as a handful of rebalancing trades, plus the liquidation of several smaller positions). You can also access “buy under” prices relative to current market prices, plus additional aggregate and security-specific data.
VOO: Easy Alpha, Big Income, Chi
This report is about generating easy alpha and big steady income from a balanced core portfolio of ETFs (such as Vanguard’s S&P 500 ETF (VOO)) and augmented with optional satellite single-stock investments as per your personal preferences (we give multiple top idea examples). This strategy will beat the pants off your peers and create an easier life for you (“chi”). After reviewing the details and advantages of VOO (and a balanced core-satellite portfolio), we conclude with our strong opinion on how best to implement this highly-customizable strategy to achieve your personal investment goals.
BDCs (Big Yields): Prices Weak as Credit Spreads Widen, Rate Cuts Loom
Sharing Updated Data: Big-yield BDCs have been particularly weak over the past few weeks (following earnings), especially in light of widening credit spreads (i.e. lending risk) and a looming rate cut by the fed (which will negatively impact some floating rate recipients more than others). Sharing updated comparison data on 35+ big-yield BDCs, plus a brief opinion on whether now is the time to buy or head for the hills.
High Income NOW: Updated Top 10 Tear Sheet, 23-Position Portfolio (9.7% Yield)
Our Top 10 “High Income NOW” Tear Sheet has been updated. And so has our complete 23-position “High Income NOW” Portfolio (aggregate yield is 9.7%). There have been several new positions added, two complete sales and some rebalancing of existing positions. You can also access “buy under” prices relative to current market prices, plus additional aggregate and security-specific data.
Quick Note: 1-Month Returns (Ugly) on Popular Stocks
Earnings Note: Oaktree Specialty Lending
Quick Note: Oaktree Specialty Lending Corp (OCSL) is a big-yield (+13.8%) BDC that has been declining in price, particularly following its latest earnings announcement this past week whereby its adjusted net investment income (“NII”) came in at $0.55 per share (a penny lower than estimates) and just matches its quarterly dividend of the same amount.
SCHD Part 2: Easy Alpha
In part one of this report, we explained why the Schwab US Dividend Equity ETF (SCHD) is for winners (including its growing dividend, low volatility and more). In this part two, we explain how SCHD can easily add big alpha to investor returns (in four very specific ways). In the conclusion of this report, we explain why many “SCHD haters” are usually barking up the wrong tree (they’re typically earning no alpha anyway) as well as our strong opinion on who should consider investing.