Buy to Open on Medley Capital Corp.
Today I am recommending a new position in Medley Capital Corp (NYSE: MCC). Entry price will be about $8.90 (for tracking purposes we will use the end of day closing price). Profit target is $10.25 for a 15% gain before MCC goes ex-dividend on about February 24, 2015.
Since it went ex-dividend on November 24, the MCC share price has declined by 22.5%. This drop has pushed the yield up to over 16%. Medley Capital has been targeted by short sellers, with short interest increasing by 40% since the end of October. Short sellers will be very aware of the 4% quarterly dividend, since they would be on the hook for that cash if a short position is held through the ex-dividend date. Selling and price action show a bottom appears to have been reached at $8.75.
Wall Street Analysts following Medley Capital have four Buy ratings and five Hold ratings on the stock.
MCC has been more volatile than the average business development company – BDC – share, making it an attractive trade as the share price is pulled up by the pending dividend announcement.
Trade: Buy MCC up to $9.00
Target: $10.25 per share for a 15% gain.