The following is an update to the Best Stocks for 2015 contest.Â
In December of last year, I wrote that I expected to see Prospect Capital Corporation (PSEC) generate returns of 40% or more over the course of 2015.
Well, as we near the end of the first quarter, we have a little catching up to do. Prospect Capital is sitting on gains of about 4%. That’s beating the S&P 500 (SPY) year to date, but it’s certainly nothing to write home about. Meanwhile, one of my competitors, Rave Restaurant Group (RAVE), is already up 116% and another, Ambarella Inc (AMBA), is up 43%.
Up against competition like that, it is time to throw in the towel?
Absolutely not.
With more than nine months left in the year, Prospect Capital is still very much in the running.
To start, Rave Restaurant Group is a microcap stock, and Ambarella is a volatile, high-beta stock. I consider it very likely that one—or both—of these stocks crashes and burns long before year end.
I’m a little more concerned about Louis Navellier’s pick this year, Apple Inc (AAPL) I myself am long Apple and consider it a worthy competitor. But as much as I like Apple as a long-term holding, I consider Prospect Capital the better buy in 2015.
Let’s take a look Prospect’s recent developments. Prospect had a lackluster earnings release last month, with EPS coming in at 24 cents per share rather than the 28 cents Wall Street expected.
But the far more important news in the earnings release was that book value remained stable. Net asset value per share was $10.35, a decline of 38 cents from the previous year. But substantially all of this decline was due to Prospect’s large dividend, which for much of 2014 was well in excess of current earnings. With the turbulence in the energy sector, there were concerns that Prospect might have some significant write-downs. Thus far, this has proven to not be the case.
