MVC Captial 11.03.2015
Shares: Total 22M. Short 95k / 1 day to cover according to average volume
Enterprise Value: 365M / 9.1x earnings
MACD: Has converged with volume may diverge due to RSI
Negatives: MVC net assets from operations are down from the last quarter and the last year. They also have unrealized losses. MVC is an opened ended fund that invest in developmental business. Its not really an ETF but it may trade according to the management. A lot of MVC profitability depends on them financing other companies, divesting options, exercising warrants, allocating assets, negotiating exit strategies and many other variables that may be out of the power of even those making good hard decisions. Compared to ARCC which isnt a pure comparison but similar it has underperformed. Compared to another fund I follow TINY which invest in nanotechnology, MVC has outperformed to the same degree.
Positives: MVC is serious about finding the right talent and is shifting to a strategy that invest in more yield. ( According to recent news ) This is wise and may break the trend of underperformance vs peers and the overall market. I also found Net incentive compensation is down, which means they didnt pay themselves hardly at all compared to last quarter which is fair considering they have unrealized losses among their investments. MVC has a huge line of credit, just paid it off last quarter and ran it again this quarter. They also received capital from another sources hinting something large may be in the works. MVC also made 16% when counting to the year ending Oct 31 compared to the other numbers I've given here today which is 9months ending then. Expenses from net assets is lower. Also the turnover in the portfolio is down in proportion to the performance and volatility in the overall market, which suggest the investors in control of these funds aren't locking in losses during periods of volatility. Considering market conditions for businesses it could be a neutral for MVC with business in need for financing and funding being offset by undesirable conditions in certain debt markets.
In summary the research I've done leads me to believe that MVC should be bought when: MVC is rising with 2.5x or more daily volume. MVC rises or falls less than 2% on good news. MVC market performs when the overall market is down more than .75%
MVC should be sold when: MVC is falling on more than 2x daily volume. When MVC falls more two day in a row on light to normal volume (watch candlesticks for close calls) . MVC exceeds 13.50 with no news. Downside is limited to 10.45. Harvey's fair Value today: 390-475M which suggest 9% upside at current price due to extreme resistance at 12.80. MVC will need big news and confirmation of execution of new strategy to break out beyond that. C-
