Source: Adrian Day for Streetwise Reports 01/02/2019
Money manager Adrian Day offers some final words on Nevsun and advice on good dividend-paying stocks for the New Year.
Nevsun Resources Ltd. (NSU, NY, 4.39) has been purchased by Zijin Mining of China, which received over 89% of the total shares outstanding voting in favor of the acquisition. Our sell on Nevsun would have filled at $4.39, for a gain of 64%. (Our first tranche was sold for a gain of 1,387%.)
If you tendered your shares, the cash will be delivered to the depository within three business days (and should be in accounts a day or two later). If you did not tender and have not sold, Zijin’s offer is being extended by 10 days, so you can tender and receive the CA$6 per share price; if you tender during the extension, the funds will be delivered within three days after the end of the extension. There is very little difference between the CA$6 and current $4.39 in New York. So you can sell—Wednesday to push the tax gain into next year—or tender.
Yields of Almost 10% of Solid Companies
Both of the business development companies on our list—Ares Capital Corp. (ARCC:NASDAQ) (15.61) and Gladstone Investment Corp. (GAIN:NASDAQ) (9.30)—saw stocks down sharply on misplaced concerns about higher interest rates. As discussed previously, the vast majority of the companies’ loans are at floating rates, while their debt is mostly at fixed rates, meaning rising interest rates actually widen the spread. It becomes a concern only when higher rates start to affect the ability of the portfolio companies, to which they have lent, to repay loans. That is not a significant concern at present.
Ares, selling below NAV and with a current, fully covered yield of 9.99%, and Gladstone, at a 24% discount to NAV, with a monthly yield of 8.8%, and supplemental distributions bring it to almost 10%, are both strong buys.
Kingsmen Creatives Ltd. (KMEN:SI) (0.50) announced a new collaboration with Hasbro to bring toys—from the Transformers to My Little Ponies—to life with Toybox, a “multi-brand life carnival” in Asia, commencing in February in Singapore. The contract is another example of how Kingsmen is the partner of choice in Asia. With a single-digit p/e, 5% yield and strong balance sheet, Kingsmen is a buy.
Adrian Day, London-born and a graduate of the London School of Economics, heads the money management firm Adrian Day Asset Management, where he manages discretionary accounts in both global and resource areas. Day is also sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is “Investing in Resources: How to Profit from the Outsized Potential and Avoid the Risks.”
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1) Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Nevsun Resources, Gladstone Investment and Ares Capital. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Nevsun Resources, Ares Capital, Gladstone Investment and Kingsmen Creatives. I determined which companies would be included in this article based on my research and understanding of the sector.
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( Companies Mentioned: ARCC:NASDAQ,