I recently came across the term Paid FUD. It refers to the deliberate spreading of fear, uncertainty, and doubt (thus FUD). My newsletter subscribers regularly share information they found, sometimes putting a very negative spin on one of my recommended investments.
Firms focused on short-selling have been known to issue negative “research reports” on stocks they have already sold short. The Paid FUD phenomenon is taking the fake negative news trends to a new level. Paid FUD allegations are rarely, if ever, verified. Sometimes the mainstream financial media picks up the false news and runs with it.
The goal of Paid FUD is to generate fear-based selling among investors. Those paying for the FUD content are positioned to profit from the other side of the trades.
A current stock market meme is that AI will destroy software companies’ businesses. Stock prices of software companies have fallen dramatically. The fear spreads into the private credit market, where many software companies have outstanding debt. These concerns about private credit debt have spread to asset management companies with private credit portfolios. The stock price of KKR & Co (KKR) is down 24% over the last six months. Blue Owl Capital Inc (OWL) is down 34%. Ares Management Corp. (ARES) is down 27%.
However, there have been no real, verified reports of actual large defaults in the private credit markets. As the companies report earnings, it turns out their private credit portfolios are performing as expected. Blue Owl Capital noted that its average annualized net realized loss rate is just 8 basis points (0.08%).
The share prices of business development companies (BDCs) have suffered, and there are many predictions of coming dividend cuts. Real, declared dividend cuts have not materialized.
On February 10, Hercules Capital (HTGC) declared an unchanged $0.40 per share quarterly dividend. Additionally, the company declared a $0.28 supplemental dividend, payable at $0.07 per share over the next four quarters. The ex-dividend date is February 25.
Year-to-date, the HTGC share price is down 10% amid fears in the private credit market. The yield with the supplemental dividends is 11%. I recommended that my Dividend Hunter newsletter subscribers quickly add to their positions in this top-tier BDC stock.
Generate up to $5,000/month with 10X less money?
Most people think they need $1.5 million to generate $5,000 per month in retirement. But I just discovered a new way to do it with 10X less money - now anyone can hit their retirement goals with thousands, not millions.
Click here to start collecting this income (next payout coming soon)
