Financial Services Sector Expertise
The Financial Services sector is a key vertical for National, with a team of banking professionals highly regarded for their deep industry expertise and relationships. Our investment banking activity in this sector mainly includes privately held and publicly traded BDCs, specialty lenders, mortgage REIT’s, investment funds and SPVs focused on equity and debt investments providing competitive yields in a low interest rate environment.
In the past six years, National has led or participated in 100+ transactions including private placements, IPOs, Follow-Ons, CMPOs, RDOs, PIPEs, M&A, and financial advisory.
Financial Services Sector Coverage
National has a robust and diverse coverage of financial institutions companies with a particular focus on Business Development Companies (BDCs) and Registered Investment Companies (RICs).
BDCs in particular have grown in number, size, and popularity as US banks have come under increasing regulatory pressure that has curtailed their lending activities and permitted non-bank lenders to thrive in their place. We believe that through independent portfolio analysis, manager selection, assessment of accounting practices, and an examination of capital management policies, investors can continue to find attractive opportunities in the space.
Capital Southwest (CSWC: Buy, $23 PT)
September 23, 2019– Recommended Action – Buy CSWC.
CSWC presents an attractive risk/reward profile with outsized upside relative to various downside scenarios. We view downside as limited given CSWC’s structural advantage over the vast majority of the BDC industry. Expected total return of 18% includes $3.00/share of regular, supplemental, and special dividends over the next year and projected appreciation ~$1/share. We ultimately believe CSWC should trade around 160% of NAV vs. its current P/NAV multiple ~120%.
Main Street (MAIN: Neutral, $40 PT)
September 23, 2019– Its valuation is more than justified by its best-in-class fundamental performance highlighted by unmatched NAV/share growth, consistent dividend growth, operating leverage 2x the industry average, and an investment portfolio valued meaningfully in excess of cost.