Private Equity Investing At A Deep Discount
Access to private equity and hedge fund investments used to be reserved solely for the super rich and institutional investors. American Capital Ltd (NASDAQ:ACAS) currently offers a unique opportunity for noninstitutional investors to invest in private equity at a deep discount to its intrinsic value.
American Capital is a publicly traded private equity firm and global asset manager with $57 billion in assets under management. Their main focus is on middle market companies in which they make investments between $10 million to $100mm. The company portfolio is very well diversified across multiple industries and sectors with approximately 152 companies in their investment portfolio. Since ACAS has been well covered by many articles in Seeking Alpha, I will not go into detail on the company. Instead, I recommend reading the Q3 2011 fact sheet presentation on the investor relations section of their website, which contains excellent information.
American Capital stock has been under tremendous selling pressure since August due to the combination of the general market selloff in Q3 and heavy liquidation from John Paulson funds. During the third quarter of 2011, the Russell 2000 index declined by 22% and the iShares iBoxx High Yield corporate bond ETF (NYSEARCA:HYG) fell by 9%. American Capital net asset value dropped by 9.4% to $11.92/share during the quarter while the stock price has fallen by 26% since the end of Q2.
John Paulson purchased 43.7mm shares of ACAS in April 2010 at $5.06. His funds have recently been liquidating shares of ACAS. The most recent filings on Bloomberg showed his position has been reduced to 32.8mm shares as of 12/22/11. Many of Paulson holdings came under heavy selling pressure last quarter as market participants smelled blood and drove down prices of his positions.
As previously mentioned, American Capital stated net asset value at the end of Q3 was $11.92/share. While it is difficult to estimate the current net asset value due to the uncertainty of ACAS diverse investment portfolio, it is reasonable to assume that book value may have increased since they last reported. Since their portfolio consists of a well diversified mix of both equity and debt investments in small cap companies, it should be highly correlated to the performance of the Russell 2000 and HYG. The Russell 2000 gained 15% during Q4 2011 and the HYG was up 8%. Using a blend of 25% Russell and 75% HYG as a proxy, would indicate that NAV may have increased by 9.75% to $13.08/share during the fourth quarter. Based on yesterday closing price of $7.34, ACAS may be trading at as much as 44% discount to NAV.
The recent actions of management also indicate their belief that shares are deeply undervalued. The company announced that they repurchased 8.4mm shares at $6.97 so far this quarter. That buyback comes on the heels of 9.1mm shares repurchased at $8.21 last quarter. Normally, I do not care for share repurchase programs as they have been responsible for so much value destruction in recent years. But, in this instance, where the company is able to repurchase stock at .56X book value, it is immediately accretive to shareholders and an attractive use of capital. Management is also vested. The CEO, Malon Wilkus owned 1.45mm shares as of his last filing.
http://www.valentinosalestore.com/ I recommend buying ACAS at current prices vs. shorting an equivalent dollar amount of the S or a combination of HYG and S in order to minimize market risk.
Disclosure: I am long ACAS and may buy or sell ACAS over the next three days. I am short the S and may buy or sell the S over the next three days. I have no positions in HYG
Maternity Fashion
Exciting as it is, pregnancy does mess with our body image as hips and bellies overflow familiar fabrics and waist measurements, abandoning us to the call of the mirror: what now?
I'm so bummed you didn't post this last week or so! I have a wedding to go to this Saturday and there were so many cute preggo dresses in there that I would love! Thanks for posting though, I will def use for other things.
http://www.isabelmaranton.com/ So far my "find" has been nonmaternity stuff. So many styles out there right now have the maternity look that's what's been getting me through summer. flowy tank tops paired with ultra lowrise shorts, etc. Anything below the belly has been working so far. It's been nice. and cheaper than buying maternity. I DID buy really cute pairs of designer jeans on eBAY though! You have to be patient, and know what styles fit you, etc. but it was so worth it. Just haven't worn any of 'em yet because it's still too warm.
In the United States, the current state of consumer debt is estimated to be at $2.56 trillion (according to the Federal Reserve Board), while average savings were pegged at 0.5% in 2008. Why are so many people in a state of debt? Two major factors could be presented here: one is the deep sense of consumerism in the American system, and another factor is how debt options, particularly home equity loans, were made highly available specially during the early 2000's.
Speaking of home equity loans, here's a brief backgrounder on this. How much your home equity is depends on how much you still need to pay on your home mortgage, subtracted from your home's fair market value. To illustrate: let's say your home's fair market value (or the estimated price of your home based on such factors as its size, location, current house values, etc.) is at $500,000. So far your mortgage balance (or the money you still have to pay) is at $200,000. That means, your home equity is at $300,000.
The value of your home equity is a factor in determining how much you qualify for a home equity loan. Through some financial institutions, you may be able to borrow almost the full amount of your home equity. Typically, figures are at 75% of the appraised value of your home minus the mortgage balance. If there are other outstanding debts (such as second mortgages), these values will be subtracted as well from your home equity loan. Your home will be the collateral to this loan (meaning, the lender will take possession of your property) in case you fail to fully pay the debt in the prearranged terms. That's why home equity loans are considered to be highrisk loans, especially when viewed in comparison with credit loans, which are mostly unsecured debts. Taking out home equity loans do have some benefits, as the home equity interests you pay may be taxdeductible.
http://www.valentinosalestore.com/ How did home equity loans come to be? A brief history of home equity loans is closely attached to the rising trends in American debts and loans. Although it has been present since the 1920's (during the Great Depression era), it began to develop as a foremost borrowing tool during the late 1970s and early 1980s. It started off with the name, "second mortgage." Due to the negative connotation of this name, however, bankers thought up the name, "home equity loans," because of its connotation of fairness and ownership.
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