Ares Capital: Red Flags I See Heading Into The Report (Rating Downgrade)

Roberts Berzins, CFA 15.74K Followers Follow Summary Ares Capital (ARCC) trades at a premium P/NAV of 0.95x versus the sector median of 0.69x, reflecting market's optimistic expectations. There is definitely a component that justifies a premium. However, there is also a whole host of aspects which would argue otherwise. In this article I share my latest views on ARCC and my thoughts on the upcoming Q2 earnings deck. DNY59/E+ via Getty Images Ares Capital ( ARCC ) is the first major BDC, which kick-starts the earnings season for BDCs. ARCC's earnings introduce the right context for the BDC investors, allowing them to understand the overall direction of travel of the sector's This article was written by Roberts Berzins, CFA 15.74K Followers Follow Roberts Berzins has over a decade of experience in the financial management helping top-tier corporates shape their financial strategies and execute large-scale financings. He has also made significant efforts to institutionalize REIT framework in Latvia to boost the liquidity of pan-Baltic capital markets. Other policy-level work includes the development of national SOE financing guidelines and framework for channeling private capital into affordable housing stock. Roberts is a CFA Charterholder, ESG investing certificate holder, has had an internship in Chicago board of trade (albeit, being resident and living in Latvia), and is actively involved in "thought-leadership" activities to support the development of pan-Baltic capital markets. Analyst’s Disclosure: I/we have a beneficial long position in the shares of OTF, KBDC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.