This article will be the first time I have opined on Prospect Capital Corporation (NASDAQ:PSEC) a beaten down stock with a great yield. While others have covered the stock in the past I felt it prudent to discuss the name for my readers and examine the company in depth because I believe shares are at a very attractive entry point for either those seeking an income source, or those looking to compound gains over a long-term horizon.
For some who are familiar with the name these opening sections may serve as bit of a review but it is necessary to orient those who are new to the company. Prospect Capital is a business development company and is the second largest externally managed one (by market cap) in the United States. A business development company is a regulated investment company. Essentially, here in the United States, these types of companies invest in smaller businesses that need capital funding to grow their operations. In turn, the business development company stands to make money by earning interest paid on the loans made. This is a simplistic view of the model, but is an accurate description.
Turning to Prospect specifically, it focuses on offering non-control debt financing to corporate management teams as well as financial sponsors. However, it also makes very selective acquisitions by investing in multiple levels of business' capital structure. The company has grown its portfolio substantially in the last few years and up until very recently.............READ MORE
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