1. CION Investment Corporation (NYSE:CION)
Number of Hedge Fund Investors in Q2 2024: 11
Short Interest % of Shares Outstanding: 0.1
CION Investment Corporation (NYSE:CION) is another asset management firm that focuses primarily on the loan market. This makes the current environment particularly important and tricky for the firm as the demand for loans is low due to the higher interest rates all over the world. Additionally, a slow economy has meant that few firms feel comfortable in their cash flows to repay loans and take out new ones. Subsequently, the deal environment for CION Investment Corporation (NYSE:CION) is complicated, to say the least, where the firm has to protect its interests while ensuring that it can take a piece of the limited demand for loans. At the same time, CION Investment Corporation (NYSE:CION) has to continuously evaluate its portfolio to ensure loan health so that it is not caught off guard by sudden defaults and has allocated buffers to mitigate any potential defaults. A key stand out point for CION Investment Corporation (NYSE:CION) is a diversified repayment profile that includes options such as payment in kind (PIK) options that allow borrowers to pay back through dividends.
CION Investment Corporation (NYSE:CION)’s management shared some of the ways in which it is managing the current turbulence during the Q2 2024 earnings call:
“During the quarter, following the review process that includes both internal and external examinations of various borrower key metrics and fair value marks. We downgraded 3 loans, offset by upgrading 4 loans on our risk rating scale. We also added one new loan to nonaccrual status during the quarter, bringing the total nonaccruals to 1.36% of the portfolio at fair value. In the aggregate, loans rated 4 or 5 comprised less than 1.5% of our total portfolio. We are pleased with the credit performance of our portfolio but remain conservatively positioned with a net leverage ratio of 1.13x. We remain active repurchasers of our common stock in Q2, buying back approximately 235,000 shares at an average price of $11.37. Subsequent to the quarter end, we intend to renew our share repurchase authorization, which we believe preserves a strong alignment with CION shareholders.
I mentioned earlier that we are operating in a challenging marketing environment, where there is an enormous amount of capital chasing a relatively small pool of new deal opportunities compared to prior years. The logical consequence of this dynamic is that new deals often have tighter credit spreads and looser protection for lenders. Amidst this backdrop, we remain highly selective in evaluating new deal opportunities, both in our traditional middle-market direct lending portfolio and in the lightly syndicated loan market. We believe this positioning is prudent given the macroeconomic environment, but at the same time, we remain nimble to adapt as needed as conditions evolve in the second half of the year.”
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