10 Best Asset Management Stocks to Buy According to Short Sellers

4. SLR Investment Corp. (NASDAQ:SLRC)

Number of Hedge Fund Investors  in Q2 2024: 27

Short Interest % of Shares Outstanding: 0.25

SLR Investment Corp. (NASDAQ:SLRC) is a specialized asset management company that deals with debt securities and other financial instruments. This leaves it sensitive to the broader interest rate environment and the associated impact on the financial health of the firms that it deals with. SLR Investment Corp. (NASDAQ:SLRC)’s shares are up by just a hairline of 1.99% over the past twelve months, which indicates the impact of the high rates and tight credit conditions on its business. Key markets that the firm operates in include broadly syndicated loans (BSLs) and collaterialized loan obligations (CLOs). BSLs guarantee repayments through cash flows, while CLOs promise their payback through other debt. Both of these struggle in a tough economy and low interest rates. As a result, SLR Investment Corp. (NASDAQ:SLRC) faces trouble with loan originations and collection in a tough economy marked by high interest rates.

SLR Investment Corp. (NASDAQ:SLRC)’s management shared key details for its performance during the Q2 2024 earnings call. Here is what they said:

“Our ability to pivot to the best risk-reward opportunities within various private credit strategies is a hallmark of SLR’s strategy allocation approach. We believe private credit investors are increasingly looking for diverse and proprietary investment strategies within BDCs. SLRC’s comprehensive portfolio had originations of $356 million and repayments of $292 million in the second quarter, resulting in net portfolio growth of $62 million. 87% of originations were from SLR’s asset-based lending, life sciences lending, and equipment finance verticals. Said another way, only 13% of our second quarter originations were in sponsor finance, a continued reversal from last year when most of our originations were concentrated in sponsor finance. Managing teams and sponsors are exploring ways to raise new capital to support owning assets over a longer time frame in order to execute their business plan.

Additionally, more sponsors have been increasing their focus on asset-rich industries in which portfolio companies can more effectively leverage current assets and ABL structures to finance their working and growth capital requirements. This has created an opportunity for asset-based lending and resulted in $130 million of ABL originations in the second quarter. Post-quarter end, we’ve identified several attractive ABL-MS opportunities and expect the counter-cyclical attribute of this financing instrument to benefit from potential economic headwinds. We are pleased with the construction quality and performance of our portfolio. At quarter end, approximately 98% of a comprehensive investment portfolio was comprised of first lien senior secured loans.”