da-kuk I have been covering Fidus Investment ( NASDAQ: FDUS ) since December last year, when I issued my first bullish article on this business development company, or BDC. Since then, I have circulated a follow-up article assessing the Q4, 2023 results, where the conclusion was also clear - i.e.
, to maintain a buy rating. On a YTD basis, FDUS has delivered positive total returns, but to a lower extent as the overall BDC market. All in all, this is fairly logical given that there has been a notable systematic push in the BDC sector, where higher beta (i.
e., more risky) BDCs have quite naturally responded in a more magnified fashion. YCharts As elaborated in the previous articles, the key advantage of FDUS is its defensive characteristics, which render it one of the most durable BDCs out there.
Just to quickly remind this, the key aspects are the following: Strong focus towards very defensive and traditional businesses that have already reached a positive cash generation phase and also have established a notable market position in the segments, where they operate. Deep diversification, both at industry and single investment level. Average interest rate coverage among the underlying investment companies at 3x, which could be easily deemed as one of the highest (safest) levels in the BDC sector.
With this being said, let's now review the most recent earnings report published by FDUS to see whether the necessary defensive elements are still there and how the investment case looks.
