Hi YXI friends,

When I first covered BDCs, I thought that technical analysis was inapplicable. This was due to my perception that BDCs are “boring” private credit companies that lend money with clear NAVs and dividend yields, how much price action can you really get out of them?

Having really zoomed in on each individual chart, I realise that my initial assumption was wrong. The market prices of BDCs not only swing a lot to create large premiums and discounts to the NAV but can also be analysed with the Elliott Waves Theory and fibonacci levels.

Today, I present three potential setups among the largest BDCs, namely GBDC, OBDC, and FSK. As an investor, I personally treat BDCs as one basket and would allocate capital accordingly.

Let’s dive in!

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. GDBC: Golub Capital

Fundamental analysis recap

GBDC focuses on the middle market, first lien senior secured loans. Their specialty is the “One Stop Loan”.

GBDC has a TTM dividend yield of 12.5%, which on its own is a high return, compared both with the median BDC dividend yield and the risk-free US Treasury yields.

Technical Analysis

GBDC Weekly (https://www.tradingview.com/x/nI4Lvv5R/)

The weekly chart shows only 3 waves up from the 2020 low, but wave (A) does not look sufficient for the entire 3-wave completion. Proportionally speaking, wave (C) of circle-C can be as high as $21, which suggests a large upside from here.

GBDC Daily (https://www.tradingview.com/x/UwjcKV9K/)

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