Looking for high yields? These BDCs might just be the game-changers your portfolio needs! 💸

Investors seeking high-yield opportunities often turn to Business Development CompaniesBusiness Development Companies (BDCs) play a crucial role in providing capital to small- and medium-sized enterprises (SMEs), as well as distressed companies, enabling them to grow... More (BDCs) for their potential to generate attractive income through dividends. Two such BDCs, Blackstone Secured Lending (BXSL) and SLR Investment Corp. (SLRC), offer compelling yields and a diversified investment portfolio. This blog post delves into the characteristics, strategies, and financial performance of these BDCs, highlighting their potential as investment options.

Blackstone Secured Lending (BXSL): A Premier BDC Offering Stability and Yield

Overview of BXSL

Blackstone Secured Lending (BXSL) is a prominent BDC primarily investing in first lien senior secured debt of private U.S. companies. Managed by Blackstone Credit & Insurance, part of the globally renowned Blackstone Group, BXSL provides retail investors with an opportunity to participate in the private lending market. The BDC’s investment strategy focuses on high-quality credit investments, offering a dividend yield of approximately 10.2%.

Key Characteristics of BXSL

BXSL’s investment portfolio is characterized by its emphasis on first lien senior secured loans, which constitute about 98-99% of its holdings. This focus on senior secured debt ensures a higher level of security in the capital structure, effectively reducing the risk for investors. With a substantial investment portfolio valued at approximately $11.3 billion, spread across 188 companies, BXSL offers significant diversification, mitigating potential risks associated with individual investments.

Another notable feature of BXSL’s portfolio is its floating rate nature, where nearly all investments are tied to floating interest rates. This positions BXSL favorably in a rising interest rate environment, as increased rates can lead to higher investment income. Additionally, BXSL maintains a strong credit profile with a non-accrual ratio below 0.1%, underscoring its commitment to investing in high-quality assets and effective credit management.

Performance and Management Strategy

Since its inception, BXSL has delivered an annual total net return of 11.4%, reflecting its robust investment strategy and adept management. The BDC is managed by Blackstone Credit & Insurance, which leverages Blackstone’s extensive resources, relationships, and expertise in credit markets. The management team focuses on providing well-structured capital solutions and value-added support to portfolio companies, enhancing operational efficiencies and growth.

BXSL’s strong financial performance is further evidenced by its total investment income, which reached $304 million in the last reported quarter, coupled with a net investment income of $166 million. The fund also boasts a strong dividend coverage ratio, making it an attractive option for income-focused investors seeking stability and yield.

Financial Strength and Outlook

Blackstone Secured Lending continues to attract investors due to its well-diversified portfolio, strong credit quality, and management’s strategic focus on generating stable income. As interest rates fluctuate, BXSL’s floating rate portfolio offers the potential for increased income, while its disciplined approach to credit management minimizes risk. Overall, BXSL stands out as a premier BDC offering a blend of stability, yield, and growth potential for investors looking to tap into the private lending market.

BXSL Technical Analysis (daily)

The chart for Blackstone Secured Lending Fund (BXSL) shows the stock currently trading at $30.07. The 50-day moving average is at $30.95, which is above the current price, indicating a possible short-term bearish trend. The 200-day moving average is at $30.04, close to the current price, suggesting that the stock is at a critical juncture where it could either find support or continue downward.

Volume analysis indicates a slight increase, but the volume is not significantly above average, suggesting a lack of strong momentum in either direction.

The Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI) is at 47.45, which is below the neutral level of 50, indicating that the stock is neither overbought nor oversold but is closer to being oversold.

The On-Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV) shows a generally flat trend, indicating that the buying and selling pressure are roughly balanced, with no significant accumulation or distribution.

The Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More is at 0.882, near the overbought threshold, which could indicate a potential pullback in the short term if it crosses above 0.8 and reverses.

The Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More shows a negative value of -161,957, suggesting there is distribution occurring, which could lead to further downward pressure.

The MACDThe MACD indicator is essentially a momentum indicator that shows the relationship between two different moving averages of price. The MACD is the difference between the 12-period ... More (Moving Average Convergence Divergence) oscillator is in a bearish phase with the MACD line at -0.33 and the signal line at -0.02, with the histogram also in the negative territory. This indicates that the stock might continue to face downward pressure.

Overall, the technical indicators suggest a cautious outlook for the stock. There is potential for further downside movement if the price does not find support at the 200-day moving average or if volume does not increase significantly to drive the price higher. The current momentum indicators like the MACD and Chaikin Oscillator indicate bearish sentiment. Therefore, the recommendation would be to Hold for now, but keep a close watch on the price action around the 200-day moving average. A break below this level could lead to a Sell recommendation, whereas a rebound with strong volume could suggest a potential Buy opportunity.

BXSL Technical Analysis (weekly)

The chart for Blackstone Secured Lending Fund (BXSL.BZ) in the weekly time frame shows the stock trading at $30.07. The Anchored Volume Weighted Average Price (VWAP) from August 1, 2023, is at $29.21, which the stock is currently trading above, indicating some level of bullishness as the price is maintaining above this key level.

Volume over the past weeks has been relatively stable, but not showing any significant spikes, suggesting that there isn’t strong momentum in either direction.

The On-Balance Volume (OBV) indicator, however, shows a cumulative decline with a current reading of -3.39 million. This indicates that the selling pressure has been outweighing the buying pressure over the past months, which could be a bearish sign.

Time-Frame Signals:

• 1-Year Time Frame: The stock has been in an uptrend since early 2023, with higher highs and higher lows, but the recent pullback below $30 could indicate the beginning of a consolidation phase. If the price holds above the VWAP and finds support around the $29-$30 range, the uptrend could continue. However, if the price falls below the VWAP and the recent lows, it may signal a potential reversal.
• 2-Year Time Frame: Over the past two years, the stock has shown a strong uptrend, but with periods of consolidation and corrections. The current price is near the upper end of the longer-term range. If the stock can break above the recent highs around $32, it could indicate the continuation of the uptrend. Conversely, failure to break higher could lead to a period of sideways movement or a more significant pullback.
• 3-Year Time Frame: Over three years, the stock has generally been in an upward trend, but the OBV shows that the accumulation phase might be weakening. While the long-term trend remains bullish, the weakening OBV could signal a potential slowdown in the upward momentum. If the stock fails to sustain above key support levels, it could enter a prolonged consolidation phase.

Past performance is not an indication of future results, and this article should not be considered as investment advice. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

SLR Investment Corp. (SLRC): A High-Yield Opportunity with a Focus on Middle-Market Companies

Overview of SLRC

SLR Investment Corp. (SLRC) is another BDC that provides investors with access to the private credit asset class through publicly traded stock. With a market capitalization under $1 billion and a dividend yield of approximately 10.8%, SLRC presents itself as a smaller, yet compelling, option in the BDC landscape. Externally managed by SLR Capital Partners, LLC, SLRC focuses on generating income through investments in senior secured loans of private middle-market companies.

Portfolio Composition and Investment Strategy

SLRC’s diversified investment portfolio primarily consists of senior secured loans, including both first lien and second lien debt instruments, which are loans secured by the borrower’s assets. The BDC also invests in asset-based loans, equipment financing and leasing, life science lending, and corporate leasing. This diversified approach allows SLRC to mitigate risk while capitalizing on opportunities across various sectors.

Similar to BXSL, SLRC’s portfolio is heavily weighted towards floating-rate investments, which are advantageous in a rising interest rate environment. The company’s investment strategy targets middle-market companies with revenues between $50 million and $1 billion and EBITDA between $15 million and $100 million. By employing a private equity approach with in-depth due diligence and carefully structured investment terms, SLRC aims to maximize returns while managing risk.

Financial Performance and Dividend Sustainability

SLRC is known for its high dividend yield, which was reported at approximately 10.5% as of early 2023. The BDC pays dividends monthly, making it attractive for income-focused investors. However, potential investors should carefully assess the sustainability of these dividends, as they depend on the company’s net investment income and overall financial health.

In April 2022, SLRC merged with its affiliate, SLR Senior Investment Corp., to streamline operations and enhance synergies. This merger is expected to reduce management fees and borrowing costs while increasing net interest margins, ultimately benefiting shareholders.

Risks and Considerations

While SLRC offers a compelling opportunity for investors seeking high yields through exposure to the private credit market, it is important to consider the associated risks. The sustainability of SLRC’s dividends is contingent on its financial health, and fluctuations in interest rates or economic conditions could impact the company’s ability to maintain its payouts. Additionally, as a smaller BDC, SLRC may face challenges in scaling its operations and maintaining a competitive edge in the market.

Insights

1. BXSL’s focus on senior secured loans offers significant security and reduced risk.
2. SLRC’s higher yield and monthly dividends appeal to income-focused investors, but sustainability is a concern.
3. Both BDCs benefit from floating-rate portfolios, positioning them well in a rising interest rate environment.

The Essence (80/20)

• BXSL: Core topics include its focus on first lien senior secured debt, a diversified portfolio with nearly all floating rate loans, and strong credit quality. It’s managed by Blackstone, leveraging extensive credit market expertise.
• SLRC: Highlights include a higher yield, diversified investments across various loan types, and recent merger developments aimed at cost reduction. Focus on the risks associated with dividend sustainability is essential.

The Guerilla Stock Trading Action Plan

1. For BXSL:
   • Evaluate the stability of its portfolio and consider the impact of rising interest rates on floating-rate loans.
   • Monitor ongoing financial performance, particularly net investment income and credit quality metrics.
2. For SLRC:
   • Assess the sustainability of dividend payments by reviewing recent financial statementsFinancial statements are the primary tool used by investors to evaluate a company's financial health. They are an important part of a company's reporting, providing a snapshot of i... More.
   • Track the performance post-merger to gauge the success of cost-reduction strategies.

Blind Spot

SLRC: The long-term effects of the recent merger on operational efficiency and cost reduction could be underestimated.

BXSL: The potential impact of market volatility on its portfolio companies’ creditworthiness is a possible oversight.

SLRC Technical Analysis (daily)

The chart for SLR Investment Corp (SLRC.BZ) shows the stock trading at $15.36. The 50-day moving average is at $15.95, and the 200-day moving average is at $15.50, indicating that the stock is currently trading below both moving averages. This generally signals a bearish trend, with the stock facing resistance at these levels.

Volume is relatively low, with the recent trading days showing no significant spikes. This suggests a lack of strong buying or selling momentum.

The Relative Strength Index (RSI) is at 46.29, slightly below the neutral level of 50. This indicates that the stock is neither overbought nor oversold but is leaning towards the oversold side.

The On-Balance Volume (OBV) indicator is showing a slight upward trend with a value of 1.12 million, suggesting some accumulation, though not strong enough to indicate a major bullish move.

The Stochastic RSI is at 0.939, which is near the overbought threshold. This suggests that the stock might face a short-term pullback if it does not break through current resistance levels.

The Chaikin Oscillator has a positive reading of 41,221, indicating a moderate level of accumulation and suggesting that the stock could see some upward momentum if buying pressure increases.

The MACD oscillator is in a bearish configuration with the MACD line at -0.45 and the signal line at -0.05, but the histogram is showing signs of narrowing, which could indicate a potential reversal to the upside if momentum picks up.

Time-Frame Signals:

• 3-Month Time Frame: The stock has been in a downtrend, but recent price action suggests a potential bottoming out around $14.50, followed by a modest recovery. However, the stock is struggling to break above the 200-day moving average, which could act as a strong resistance level. A successful break above $15.50 with increased volume could signal a short-term bullish move, while failure to do so might lead to further consolidation or a return to the recent lows.
• 6-Month Time Frame: Over the past six months, the stock has shown a volatile pattern with sharp drops and recoveries. The moving averages indicate a bearish bias, and without significant buying pressure, the stock may continue to face resistance around the $15.50-$16.00 level. A clear break above these levels with sustained volume could suggest the resumption of an uptrend, while failure to do so may indicate continued sideways movement or further declines.
• 12-Month Time Frame: In the broader 12-month perspective, the stock is near a critical support zone around $15.00. If the stock can hold above this level and regain its moving averages, it may signal the potential for a longer-term recovery. However, continued weakness and a break below $14.50 could suggest a more prolonged bearish phase.

The overall technical outlook for SLR Investment Corp is cautiously bearish in the short term, with potential for a recovery if key resistance levels are broken with strong volume. The stock needs to show more convincing signs of accumulation and a break above the moving averages to shift the outlook to bullish.

SLRC Technical Analysis (weekly)

The chart for SLR Investment Corp (SLRC) in the weekly time frame shows the stock trading at $15.36. The Anchored Volume Weighted Average Price (VWAP) from August 1, 2023, is at $15.25, and the stock is currently trading slightly above this level, which could indicate a potential support zone around $15.25.

Volume over the recent weeks has been relatively low, with no significant spikes, suggesting a lack of strong momentum in either direction.

The On-Balance Volume (OBV) indicator shows a value of -3.47 million, indicating a general decline in buying pressure over the past months. However, the recent uptick in OBV suggests some accumulation may be occurring, though it is not yet strong enough to indicate a clear bullish trend.

Time-Frame Signals:

• 1-Year Time Frame: Over the past year, the stock has shown a pattern of higher highs and higher lows, but with recent weakness that has brought it back to critical support around $15.00-$15.25. The stock’s ability to hold above the VWAP and the support zone is crucial for a potential recovery. If the stock fails to maintain above these levels, it could indicate a further downside, while a sustained move above $15.50 could suggest a continuation of the longer-term uptrend.
• 2-Year Time Frame: Over the two-year period, the stock has experienced periods of volatility but has generally been in a sideways to upward trend. The recent pullback towards $15.00-$15.25 is a critical area to watch. If the stock can rebound from this zone with increasing volume, it may signal the potential for the uptrend to resume. However, if the price falls below this level, it could indicate a prolonged period of consolidation or a deeper correction.
• 3-Year Time Frame: In the broader three-year perspective, the stock has shown resilience, with the current price action suggesting it is at a significant inflection point. The $15.00-$15.25 area has acted as support in the past, and maintaining above this level is crucial for a continued bullish outlook. A sustained break below this zone could indicate a more extended bearish phase, while a rebound could lead to a retest of higher levels, potentially above $16.00.

Past performance is not an indication of future results, and this article should not be considered as investment advice. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Both Blackstone Secured Lending (BXSL) and SLR Investment (SLRC) offer attractive opportunities for investors seeking high yields in the BDC sector. BXSL stands out with its focus on senior secured loans, strong credit quality, and robust financial performance, making it a solid choice for those looking for stability and income. On the other hand, SLRC, with its diversified portfolio and higher yield, presents a more speculative opportunity, particularly for investors willing to take on additional risk in pursuit of higher returns. As with any investment, potential investors should carefully evaluate their risk tolerance and investment objectives before committing to these BDCs.

Frequently Asked Questions

What is Blackstone Secured Lending (BXSL)?

Blackstone Secured Lending (BXSL) is a Business Development Company (BDC) that primarily invests in first lien senior secured debt of private U.S. companies. It is managed by Blackstone Credit & Insurance, a part of Blackstone, the largest alternative asset manager globally.

What is the dividend yield of BXSL?

BXSL has a dividend yield of about 10.2%.

What are the key characteristics of BXSL’s investment portfolio?

BXSL’s portfolio predominantly consists of first lien senior secured loans, which constitute about 98-99% of its portfolio. The portfolio is valued at approximately $11.3 billion and is spread across 188 individual companies, providing significant diversification.

How does BXSL benefit from rising interest rates?

Nearly all of BXSL’s investments are floating rate, which can benefit from rising interest rates by increasing investment income.

What is the credit quality of BXSL’s portfolio?

BXSL maintains a strong credit profile with a non-accrual ratio below 0.1%, indicating excellent credit quality and management.

How has BXSL performed since its inception?

BXSL has delivered an annual total net return of 11.4% since its inception, reflecting its robust investment strategy and management.

Who manages BXSL, and what is their strategy?

BXSL is managed by Blackstone Credit & Insurance, leveraging Blackstone’s extensive resources and expertise in credit markets. The management team focuses on providing well-structured capital solutions and value-added support to portfolio companies.

What is SLR Investment Corp. (SLRC)?

SLR Investment Corp. (SLRC) is a Business Development Company (BDC) that provides investors with access to the private credit asset class through publicly-traded stock. It is managed by SLR Capital Partners, LLC, and focuses on generating income through investments in senior secured loans of private middle-market companies.

What is the dividend yield of SLRC?

SLRC has a high dividend yield of approximately 10.5% as of early 2023, with dividends paid monthly.

What are the key components of SLRC’s investment portfolio?

SLRC’s portfolio primarily consists of senior secured loans, asset-based loans, equipment financing and leasing, life science lending, and corporate leasing. The portfolio is heavily weighted towards floating-rate investments.

What was the impact of the merger between SLR Investment Corp. and SLR Senior Investment Corp.?

The merger, which took place in April 2022, streamlined operations and enhanced synergies. It is expected to reduce management fees and borrowing costs while increasing net interest margins.

What is SLRC’s investment strategy?

SLRC targets investments in companies with revenues between $50 million and $1 billion and EBITDA between $15 million and $100 million. The company employs a private equity approach, involving in-depth due diligence and structuring of investment terms.