PSEC added to the SMA Portfolio
In a move that some may see as capitulation, I’ve decided to enable the SMA Portfolio more leeway to capitalize on opportunities provided by the market. The portfolio will no longer strictly follow the signals of the Tactical Timing System (TTS), as it has largely in the past. The SMA Portfolio severely underperformed the indexes last year which will be detailed in a 2013 performance review in the near future.
The first move was to allocate approximately 6% of the portfolio to Prospect Capital Corporation (PSEC). PSEC is a business development company (BDC) specializing in middle market, mature, mezzanine finance, later stage, emerging growth, buyouts, recapitalizations, turnaround, growth capital, development, subordinated debt tranches of collateralized loan obligations, cash flow term loans, and bridge transactions. According to news sources, S&P has decided to remove BDCs from their indexes. This has caused PSEC to drop approximately 3% today. PSEC yields approximately 11% and demonstrated reasonable stability during the financial crisis of 2008-2009 (see chart below).
PSEC was purchased at $11.06 today. The purchase was funded from a partial sale of the Vanguard Short-Term Corporate Bond ETF (VCSH).
I also see an opportunity developing in the contract deep sea oil drilling stocks. I may initiate a position there in the near future.
Disclaimer: It is very difficult to outperform a buy and hold strategy. Many investors have found themselves well served over long time horizons by investing regularly in a diversified portfolio of stocks or low cost, broadly diversified indexed stock funds. Future performance may not reflect past performance. Profitable trades are not guaranteed. Although accuracy is strived for, no guarantee is made regarding the accuracy of data presented.