Oppenheimer’s Favorite Stocks For Next 12 Months: Top 32 Stock Picks

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

Share Price Upside: 3%

Number of Hedge Fund Investors In Q2 2024: 10

Average Analyst Share Price Target: $19

Crescent Capital BDC, Inc. (NASDAQ:CCAP) is an asset management company that is referred to as a business development firm since it provides loans, private equity, and other capital to firms seeking to expand their businesses. One factor that differentiates Crescent Capital BDC, Inc. (NASDAQ:CCAP) from its rivals and somewhat insulates it from the risky nature of the capital provision industry is the fact that its loans are guaranteed by the borrower’s assets. Additionally, Crescent Capital BDC, Inc. (NASDAQ:CCAP) seeks to invest in non cyclical businesses, which hedges it against economic downturns – a key factor since 90% of its portfolio is made of loans. Another key borrower selection criterion for the firm is a loan to book value of less than 30%. As per Oppenheimer, Crescent Capital BDC, Inc. (NASDAQ:CCAP) “seeks to maximize the total return to its stockholders by generating current income and capital appreciation by investing in secured and unsecured debt, as well as related equity securities.”

Crescent Capital BDC, Inc. (NASDAQ:CCAP)’s management shared additional details for its loan portfolio 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%.”