Opinions
James Thorne
Goldman Sachs Business Development
GSBD-N
PAST TOP PICK
Dec 07, 2016
Stock price when the opinion was issued
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Business development companies were developed in the 1970s when the US government was trying to figure out how to get money into the hands of businessmen. They were focused on lending money to companies that couldn’t get money from Wall Street or traditional banks. Because of securitization, banks got into this business and it is a very sleepy business. They have to distribute 90% of what they get in terms of interest rates from their clients. In 2008, you had Basil III, Dodd Frank and the Volcker rule, so banks could no longer lend willy-nilly to anybody, so they pulled back. Dividend yield of 9.11%.
With the recent disasters in Texas and Florida, is this a Buy? He thinks the US is going through a housing recovery. A lot of housing was not maintained or upgraded after the global financial crisis. He doesn’t know this one, but it is obviously an interesting space. Expects there will be more upside in US housing, because their market is significantly behind relative to the Canadian market. Housing prices can go significantly higher. Look at the underlying issues before you definitely go into this, but structurally he thinks there is more growth in that market.
(A Top Pick June 16/16. Up 21.61%.) This lends money to the middle market, companies in the US that cannot get loans from a bank or from Wall Street. These are favourite financing vehicles of private equity. By law, they have to pay out 90% of the income they get from lending money, so they have distributions of somewhere from 9% to 11%.