We recently published a list of Jim Cramer’s Latest Stock Portfolio: Top 10 Recommendations. Since ARES Capital Corporation (NASDAQ:ARCC) ranks 9th on the list, it deserves a deeper look.
Jim Cramer in a latest program talked about the concept of “suitability” of stocks in investing, which emphasizes the importance of picking individual stocks based on your personal context, circumstances and life goals instead of short-term market movements. Cramer recalled his days at the Harvard Law School and how he used to run to the library to read research reports on companies to dig out information on quality stocks on a week-to-week basis. When Cramer joined Goldman Sachs, an “executive” at the firm introduced him to the concept of suitability, advising him never to recommend stocks to people without knowing what they want out of investing. According to Cramer, that “best semiconductor stock” might not be good for all individuals and therefore it’s necessary to know the “tolerance” and risk appetite of investors.
Answering a question during the program, Cramer said technical analysis, including paying attention to RSI values, is “incredibly” important to him and he does not like to buy stocks if “their chart is bad.”
For this program we watched several latest programs of Jim Cramer and picked 10 stocks he talked about recently. These include stocks he’s bullish on as well as the ones he recommends selling. We have analyzed each stock in detail to see its fundamentals and know what the Wall Street believes about it. We have also mentioned hedge fund sentiment with each company. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
ARES Capital Corporation (NASDAQ:ARCC)
Number of Hedge Fund Investors: 17
Jim Cramer said he cannot recommend ARES Capital Corporation (NASDAQ:ARCC) despite its strong 9% dividend yield.
“I have no idea what loans they have, what’s inside the company so I cannot recommended that even though it has a good yield.”
ARES Capital Corporation (NASDAQ:ARCC) is an alternative investment manager and a business development company focusing on acquisition, recapitalization, debt restructuring, financing, and leveraged buyout transactions. ARES Capital Corporation (NASDAQ:ARCC) shares have gained about 11% over the pats one year. There have been concerns that possible rate cuts would affect the stock since business development companies invest in debt securities of small to mid-sized companies. BDCs get impacted by rate cuts since they earn a spread between the interest income they receive from their investments and the interest expense they pay on their borrowings. Changes in interest rates can affect this spread.
During the first quarter, however, ARES Capital Corporation (NASDAQ:ARCC) saw strong deal activity. Commitments saw a 50% QoQ growth and a whopping 364% YoY growth. However, core EPS missed estimates and net investment income came in at $325 million, down from $345 million in the previous quarter, but higher than $318 million from last year.
The stock’s forward P/E is 8.87, down from the industry median of 10.7. However, for those who want to avoid upcoming headwinds from potential rate cuts, ARES Capital Corporation (NASDAQ:ARCC) might not be the best option.
Overall, ARES Capital Corporation (NASDAQ:ARCC) ranks 9th on Insider Monkey’s list titled Jim Cramer’s Latest Stock Portfolio: Top 10 Recommendations. While we acknowledge the potential of ARES Capital Corporation (NASDAQ:ARCC), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ARES Capital Corporation (NASDAQ:ARCC) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
