Robert Karr

Since the Fed increased interest rates in December 2016, Prospect Capital (PSEC) could see some pressure on its cost of capital in 2017.

In this series, we’ll look at Prospect Capital’s expected performance, deployments, portfolio strategy, yields, balance sheet strength, dividends, and valuations.

Apollo Investment’s (AINV) realized and unrealized gains stood at $1.6 million in fiscal 2Q17 compared to realized losses of $42.6 million in fiscal 1Q16.

At the end of fiscal 2Q17, Apollo Investment’s (AINV) oil and gas investments represented 9.7% of its total portfolio, or $246 million.

Currently, Apollo Investment (AINV) is trading at 8.5x on a one-year forward earnings basis. Its peers are trading at 8.8x.

Apollo Investment’s (AINV) total portfolio stood at ~$2.6 billion in fiscal 2Q17 compared to ~$3.2 billion in fiscal 2Q16.

Apollo Investment (AINV) posted earnings per share of $0.18 in fiscal 2Q17, compared to analyst estimates of $0.17. In this series, we’ll study AINV’s performance, yields, capital deployment, portfolio, dividends, and valuations.

Payment processors are now seeing improved performances on increased spending, new technologies, expansion into global markets, and the stable US dollar.

Berkshire Hathaway (BRK-B) is expected to post EPS (earnings per share) of $2,829 per share in 4Q16 and $2,880 in 1Q17.

Blackstone Group (BX), the world’s largest alternative manager, invested $2.9 billion during the September 2016 quarter.

Over the past few years, closed-end funds (PSP) have deployed funds in middle market companies with better credit ratings.

Closed-end managers deploy money in middle market companies engaged in businesses across sectors by raising capital through share issuances.

KKR & Company (KKR) expects to post EPS (earnings per share) of $0.41 in 3Q16, reflecting a subdued performance compared to its 3Q15 numbers.

As of October 2016, KKR has bought back 31.5 million common units for $457 million of its announced $500 million share repurchase program in December 2015.

KKR’s Capital Markets and Principal Activities segment saw revenues of $47 million in 3Q16, as compared to $40 million in 3Q15 and $39 million in 2Q16.

In 3Q16, KKR’s Public Markets segment reported total revenues of $84 million in 3Q16, as compared to $64 million in 3Q15.

In 3Q16, KKR’s Private Markets segment reported revenues of $549 million in 3Q16, as compared to $12 million in 3Q15 and $453 million in 2Q16.

E*TRADE’s bank offers its clients FDIC insurance on a certain amount of deposits. It deploys funds primarily in low-risk securities.

E*TRADE Financial reported DARTs (daily average revenue trades) of ~151,905 during 3Q16. It included 6,500 DARTs from the OptionsHouse acquisition.

Ares Capital (ARCC) stock has risen ~1.6% over the past six months. The company saw a strong performance in 3Q16 on higher deployment, yields, and lower expenses.

Ares Capital (ARCC) has consistently enhanced its exposure to second lien debt in a bid to generate higher yields.

Ares Capital’s (ARCC) portfolio totaled $8.8 billion at fair value as of September 30, 2016.

By the end of September 2016, Ares Capital (ARCC) had a diversified portfolio of 215 companies totaling $8.8 billion at fair value.

Ares Capital (ARCC) posted EPS (earnings per share) of $0.43, beating Wall Street analysts’ estimate of $0.39 in 3Q16.

Prospect Capital has been operating at higher leverage to take advantage of low rates. But the Fed is expected to raise interest rates in calendar 4Q16.

Berkshire Hathaway reported its third quarter earnings on November 5, 2016. The company missed analysts’ operating earnings per share estimates of $3,022 with reported EPS of $2,951.

Prospect Capital (PSEC) has used the low interest rate environment to its advantage by deploying higher leverage over the past couple of years.

In fiscal 4Q16, Prospect Capital (PSEC) made $294 million in investments, a substantial rise compared to its investments of $23 million in fiscal 3Q16.

Prospect Capital (PSEC) is expected to post earnings per share (or EPS) of $0.24 in fiscal 1Q17, a fall of $0.01 compared to estimates.

E*TRADE Financial (ETFC) operates the federally chartered savings bank E*TRADE Bank. This structure has been deployed by many major brokers in the US.

E*TRADE Financial reported DARTs (daily average revenue trades) of ~153,000 in 2Q16. The company’s DARTs fell 8% from the previous quarter and rose 2% YoY.

In 2015, fund managers took advantage of lower valuations and the availability of a record dry powder in order to make fresh investments at lower valuations.

Visa (V) reported total transactions of $30.2 billion in fiscal 3Q16, compared to $27 billion in fiscal 3Q15—a growth of 11.8% year-over-year.

PNC Financial’s non-interest income for 2Q16 increased by 10% over the previous quarter, mainly due to higher fee income growth.

Banking stocks are expected to benefit from higher interest rates, but not immediately. Also, rising interest rates would be countered by higher existing liquidity.

American Express’s Global Commercial Services’ total revenues net of interest expense fell by 9% to $817 million in 3Q15, forming 10% of its total revenues.

Ares Capital’s (ARCC) portfolio totaled $8.7 billion at fair value as of September 30, 2015. Its total assets stood at $9.2 billion.

The Carlyle Group’s (CG) private equity business derives value from the effective management of its operating companies as well as the returns generated for its unitholders or limited partners.

The Carlyle Group (CG) raises funds and investment commitments using a partnership structure, also known as an investment vehicle.

Goldman Sachs engages in asset management, investment banking, wealth management, institutional sales, and trading activities across asset classes as well as regions.

Goldman Sachs’ major services in the division include offerings related to interest rate products, credit products, mortgages, currencies, and commodities.

Charles Schwab’s valuations declined significantly over the past month mainly due to macro factors such as China’s slowing economy and a weaker domestic economy.

Morgan Stanley divides its non-interest expenses into compensation and non-compensation. It’s compensation expenses (and benefits) are ~80% of this class.

Berkshire Hathaway has doubled its earnings and balance sheet potential since the financial crisis of 2007.

Major mutual funds prefer Berkshire Hathaway (BRK-B) over private equity firms and asset managers like Blackstone (BX) and BlackRock (BLK).

Blackstone (BX) generated revenues of $2.7 billion and economic income of $1.8 billion for the year, backed by strong performance of BCP V and BCP VI.

The length of time seed capital is held in a portfolio depends on various factors such as how long it takes to generate cash flow from unrelated investors.

KKR has institutionalized the process of creating value in its portfolio companies through KKR Capstone.

KKR has a diverse revenue model, making fees for providing investment management to its funds, investment vehicles, managed accounts, and finance companies.

KKR structures its investment vehicles as a partnership or combination of domestic and overseas partnerships that contribute capital toward the fund.