10 Best Asset Management Stocks to Buy According to Short Sellers

6. Crescent Capital BDC, Inc. (NASDAQ:CCAP)

Number of Hedge Fund Investors  in Q2 2024: 10

Short Interest % of Shares Outstanding: 0.33

Crescent Capital BDC, Inc. (NASDAQ:CCAP) is a middle market private equity and loan provider headquartered in Los Angeles, California. Its business model sees the firm focus primarily on loans that are secured by the borrower’s assets and industries that are less vulnerable to the economic business cycle. This protects Crescent Capital BDC, Inc. (NASDAQ:CCAP) against the risky nature of having more than 90% of its portfolio geared towards loans. At the same time, the firm’s business also slows down in a high rate environment, which corresponds with a lower corporate appetite for debt financing. Crescent Capital BDC, Inc. (NASDAQ:CCAP) is a relatively safe player in the loan market, as it targets firms with roughly 30% loan to book value percentages, which also increases its portfolio buffer when it comes to the lien loans that predominantly account for its portfolio.

This portfolio is also boosted by the equity invested in the borrower companies, as Crescent Capital BDC, Inc. (NASDAQ:CCAP)’s management pointed out during the Q2 2024 earnings call:

“That being said, we have continued to closely monitor the impact of borrowing costs on our portfolio companies given the elevated interest rate backdrop. The weighted average interest coverage of the companies in our investment portfolio at quarter end remained stable at 1.7x as compared to the prior quarter.

As a reminder, this calculation is based on the latest annualized base rate each quarter. We also continue to closely monitor how our portfolio companies are managing fixed operating costs. Our analysis demonstrates that our portfolio companies in the aggregate are well positioned to address fixed charges with operating cash flows and available balance sheet liquidity. As expected, we saw a modest decrease in the aggregate of all utilization during the second quarter with approximately 57% of aggregate vulnerable capacity available across the portfolio at a quarter end, which is sufficient in our view. It is worth noting that we have seen an increase in repricing requests given tight spreads. Our approach to repricing is that a portfolio company ought to have demonstrated improvement in creditworthiness since underwrite through growth and deleveraging in order to reward or repricing.

The strength of our portfolio continues to benefit from the substantial amount of equity invested in our companies. Most of it is applied by large and well as private equity firms with whom we have long-standing relationships and have partnered with in multiple transactions. And we note that the weighted average loan to value in the portfolio at the time underwrite is approximately 40%.”