Ares Capital Corporation

Ares Capital Corporation (NASDAQ: ARCC) is a specialty finance company, which is a closed-end, non-diversified management investment company. The Company's investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests primarily in United States middle-market companies.

Recent Business Highlights

• New Investment Commitments in Q3 2023: In the third quarter of 2023, Ares Capital executed new investment commitments totaling approximately USD 1.6 billion, with around USD 1.2 billion funded. These commitments included 20 new portfolio companies and 30 existing portfolio companies, representing 228 separate private equity sponsors in Ares Capital’s portfolio as of September 30, 2023. Notably, 70% of the new commitments were in first lien senior secured loans, with 84% in floating rate debt securities. Ares Capital retains the option to sell all or part of these commitments.
• Exits and Portfolio Metrics: During the same quarter, Ares Capital exited approximately USD 1.3 billion of investment commitments, including USD 151 million of loans sold to IHAM or certain vehicles managed by IHAM. Of the exited commitments, 48% were first lien senior secured loans, and 78% were floating rate. As of September 30, 2023, the weighted average grade of the portfolio at fair value was 3.1, and loans on non-accrual status represented 1.2% of total investments at amortized cost.
• Financial Position and Capital Resources: As of September 30, 2023, Ares Capital possessed USD 527 million in cash and cash equivalents and USD 11.6 billion in total aggregate principal amount of debt outstanding. The company had approximately USD 4.8 billion available for additional borrowings under existing credit facilities. In the third quarter, Ares Capital issued approximately 11.1 million shares of common stock, generating net proceeds of around USD 214 million. Additionally, in August 2023, the company issued USD 600 million in aggregate principal amount of unsecured notes.
• Dividends and Recent Developments: During the three months ended September 30, 2023, Ares Capital declared a third quarter 2023 dividend of USD 0.48 per share, totaling approximately USD 271 million, paid on September 29, 2023. Recent developments from October 1, 2023, through October 18, 2023, include new investment commitments of approximately USD 410 million, of which USD 297 million were funded, and exits of approximately USD 158 million of investment commitments. As of October 18, 2023, Ares Capital had an investment backlog and pipeline of approximately USD 820 million and USD 0, respectively. 

Technical Observation (on the daily chart)

Presently, the stock has given a return of approximately 18.17% since reaching its lowest point in the past 52 weeks, which occurred on March 27, 2023. The Relative Strength Index (RSI) over a 14-day period stands at 57.58, indicating a state of potential consolidation. The price is currently near its 52-week high price of USD 20.21, with an expectation of a breakout above and decent momentum if the high is broken. Additionally, the stock's current positioning is above both the 21-day Simple Moving Average (SMA) and the 50-day SMA, which may serve as dynamic short-term support levels. A breakout in any direction from the consolidation range of USD 19.50-USD 20.50, will decide the further trend’s direction in the medium term.

As per the above-mentioned price action, momentum in the stock over the last month, and technical indicators analysis, a ‘WATCH’ rating has been given to Ares Capital Corporation (NASDAQ: ARCC) at the closing market price of USD 20.03 as of January 03, 2024. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc. 

How to Read the Charts?

The yellow colour line reflects the 21-period simple moving average (SMA) while the blue line indicates the 50- period simple moving average (SMA). SMA helps to identify existing price trends. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The orange colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The red and green colour bars in the chart’s lower segment show the volume of the stock. The volume is the number of shares that changed hands during a given day. Stocks with high volumes are more liquid than stocks with lesser volume as liquidity in stocks helps with easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by individual. Technical reports in general chart out metrics that may be assessed by individuals before any stock evaluation. The above are illustrative analytical factors used for evaluating the stocks; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance. 

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is January 03, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’