Skip to main content

Dow 8000 - what's next ?

Now that Dow has closed 8000 second time in 2 weeks and S&P is up by 27% from its low of early March, many questions are on every investors mind - What's next ? Is it going up or down ? Have we already seen the bottom or have we missed the rally ?

When DOW was below 7000, I mentioned that it does not matter where markets are headed as long as you are in the market for at least 12-24 months. In that time span, DOW would go below 7500 and above 9000. So it's up to your comfort level if you want to get out of market to possibly enter again when it goes below 7500 or stay in the market to catch the rally above 9000. Personally, I am in the market with time-span of 12-24 months. IMO, we are just getting started on next bull run - there would be lot of volatility along the way. But who said making money is easy:-)

Now stock of week section:

Symbol: ACAS
Company: American Capital
Buy price: $ 2 to $ 2.40
Target price in 12 months: $ 3 to $3.60 (for 50% return)
Company background:
American Capital is an equity firm and a global asset manager. The Company invests in private equity, private debt, private real estate investments, early and late-stage technology investments, special situation investments and alternative asset funds managed by American Capital and structured finance investments. It operates in two segments: investment portfolio and alternative asset management business.

Selection reasons: 
The stock is down by more than 90% in last 12 months on fear that it would not make it due to its covenant violations. It has also cancelled distributions for the quarter. I think ACAS has great portfolio of companies under its private equity umbrella (e.g. Mirion Technologies providing radiation monitoring systems and many more). So technically it may be in violation for its coverage ratio covenants, banks would not call it default (as long as ACAS keeps on paying interest) on fear that it would damage their own balance sheets. Another reason for my selection was that ACAS has publicly (see IR section of its website) said following - this amounts to nearly $1.20 per share:

American Capital will evaluate the declaration of its quarterly dividend after financial results are determined each quarter. American Capital intends to declare by June 15, 2009 and pay by September 30, 2009 $296MM of its 2008 remaining rollover taxable income in order to meet its RIC requirement and avoid any income tax liability.

IMO it's great (but very risky) bet on recovery of small private equity and credit market recovery. If this company survives, it would be a great investment for next 12-24 months.

(disclaimer: I do own ACAS common stock)

Good luck and have a good weekend!

/Shyam

Comments

Popular posts from this blog

2024: The year of.....

Wishing you a joyful New Year filled with laughter, love, and unforgettable moments, surrounded by cherished family and friends. May the 2024 bring similar gains as in 2023! I had great 2 weeks break with travels to Turkey with family and then solo trip to Palm Springs. Both places are amazing and definitely worth a visit if you get chance. Talking about gains in 2023 - Here is recap of 2023.. Inflation fallen below 4% and heading towards 3% Unemployment firmly below 4% Real wages growing above 4% GDP growth around 3% Markets: S&P notching one of the best year with 24% gains while Nasdaq doing even better with 40% gains thanks to Magnificent-7 (or TAMMANNA) many of which had triple digit gains My personal recommendations did exceptionally well - many of which were up by high double digits (e.g. INTC) and some of them had triple digit gains (e.g. META) All in all - 2023 was great year.  As calendar changed to 2024, what's in store for new year? This is election year in many coun

Roaring 20s....Again!

About 2 years back coming out of COVID pandemic, I wrote blog titled " New Roarin' 20s.."  It covered what happened in 1920s and what are the factors now which would trigger new roaring 20s. Do check out the blog...almost all factors are valid even now. 2022 went sideways due to inflation pressures which triggered historical steep rate hikes by central banks which led to tech companies taking more measured approach and laying off 200,000 employees....all of that changed in Nov'22 when ChatGPT was launched...even though I had mentioned AI/ML as one of the factor in my previous blog, ChatGPT really captured the imagination of the world and changed the outlook of AI instantly similar to what Netscape did with the Internet and iPhone did with the mobile. The singular concept of "Language is the Interface" made AI accessible instantly to billions of normal people....And now without mentioning AI, no talk starts or ends in tech world..and despite onsite of most-aw

It was not meant to be...

I imagined today' day (Nov 19, 2023) little differently than what it turned out to be..had a watch gathering at my place with few friends for India vs Aus ICC Cricket World Cup Final. Both teams deserved to be in the final - India winning all games in this tournament and Aus winning last 8 games after initially losing 2 games at start of tournament. The match was being played at the biggest stadium in the world (over 132,000 capacity) and over billion people tuning in...maybe most watched single sports event ever. After Australia won the toss, they choose to field (that's what most likely India wanted). India started well but then wickets kept dropping and India ended with total of 240 all out. That's when all of us knew that the dream of winning third world cup is over...despite one of the best bowling squad India ever had....The score was just not enough even for the best bowling to defend against one of the most professional and mentally strong team....No wonder Australi