John Barry, CEO of Prospect Capital (PSEC), has been a repeat buyer of shares this month. Over four transactions, he has picked up almost 2.4 million shares, paying just under $13 million to do so. Barry has also been a buyer back in May, with two transactions valued at over $4.3 million.
Other company insiders have also been buyers recently, including a company director and the CFO. Over the past two years, insiders have only been buyers of shares, with no insider sales.
Overall, Prospect insiders own 27% of shares.
The business development company is down 12% over the past year. Prospect lends capital to businesses, either in return for an equity stake or for corporate bonds.
Currently, shares trade at 0.6 times their price to book, a significant discount from their overall portfolio. That suggests some concern that the relatively high interest rates over the past few years are weighing on companies that may need to borrow, such as those in Prospect’s portfolio.
Action to take: Investors looking for current income may like shares here. The stock yields 13.6%, as a BDC is required to pay out 90% of earnings as dividends. With this high of a yield, investors should expect little capital gains.
For traders, the high yield on shares makes options trades unattractive. However, with interest rates set to decline, prices may take off. The January 2025 $5 call, last going for about $0.40, could see mid-double-digit returns through the end of the year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.