American Invest Hub
  • Politics
  • Investing
  • Business
  • Latest News

American Invest Hub

  • Politics
  • Investing
  • Business
  • Latest News
Investing

Oxford Lane Capital (OXLC) has a fat 20% yield: is it a buy?

by admin October 29, 2024
October 29, 2024
Oxford Lane Capital (OXLC) has a fat 20% yield: is it a buy?

Oxford Lane Capital (OXLC) stock has risen modestly this year and is hovering near its all-time high of $5.35. It has risen by 6% this year, and thanks to its fast 20% yield, its total return has been 24%, higher than the Vanguard S&P 500 index (VOO).

OXLC has become one of the best-performing dividend companies this year, moving in the same class as Main Street Capital, whose total return has been 29%.

What is OXLC?

Oxford Lane Capital is a leading American company that most people outside finance and fixed income have heard about because it does not offer its services to consumers.

Instead, the company offers relatively complicated financial solutions. It invests in debt and equity tranches of collateralized debt obligations (CLOs).

A CLO is a structured financial product that bundles together a large number of corporate loans, mostly to companies with low credit rating. 

In its case, Oxford Lane focuses on CLOs, which are collateralized by senior loans. Unlike other firms, OXLC loans have no exposure to real estate and mortgage loans, auto loans, and credit cards. 

The company has invested in about 195 CLO structures. Some of the top parts of its portfolio are Elmwood, Regatta, Onex CLO Warehouse, Ares, Milford Park, and Windriver. Its top ten investments account for about 20% of its exposure. 

The most recent presentation showed that Oxford Lane’s biggest investments are in the high-tech industry, followed by healthcare, banking and finance, services, hotels, and media industries. 

The benefit of its business model is that its CLOs are senior secured, meaning that it is usually the first one to be paid. Even when there is a default, the company will be the first to receive any payments that come from the sale of the asset.

Another advantage is that the company has some covenants that can be triggered and move a borrower’s funds to repay senior tranches. 

The disadvantage of this approach is that the company often takes a lower yield than companies that invest in junior debt because of the risks involved. 

At the same time, according to Bloomberg, the CLO industry has now become worth over $1.3 trillion as demand has jumped. The challenge is that managers are not creating bonds fast enough to meet demand, meaning that they are running out of things to buy.

Potential catalysts for Oxford Lane Capital stock

There are three potential catalysts for the Oxford Lane Capital stock. First, its returns could get juiced because of the ongoing wave of resetting, which has soared to a record high. Data by Citigroup shows that resets, a process of refinancing for CLOs, soared to $26 billion in August. At the same time, the spreads or risk premium has narrowed to the tightest point in over two years.

Citi has more good news for companies in the CLO market as it expects that between $80 billion and $100 billion will reset by December. 

The second potential catalyst for Oxford Lane Capital is that mergers and acquisitions (M&A) could continue doing well if Donald Trump wins the general election. Trump will likely replace Lina Khan, who has aggressively fought some big mergers and acquisitions. 

She has sued to stop some big deals like Tapestry and Capri merger and JetBlue and Spirit Airlines. If she is replaced, then there will be high chance of an M&A boom, especially now that interest rates are coming down. 

The third catalyst for OXLC stock is that default rates have remained significantly low. Even the much-talked-about wall of maturities in the real estate industry has not led to substantial defaults in the sector.

Low default rates means that the fund will continue generating strong returns in the foreseeable future. 

However, there are two potential cons of investing in OXLC. First, it always trades at a premium to its net asset value (NAV). Second, it could struggle as interest rates continue moving downwards. On the positive side, interest rates are not expected to fall as sharply as initially feared.

Oxford Lane Capital stock price analysis

OXLC chart by TradingView

On the weekly chart, we see that the OXLC stock has done well in the past few months. It has formed a cup and handle chart pattern, a popular continuation sign. The recent consolidation is part of the handle section. 

Oxford Lane has remained above the 50-week and 25-week Exponential Moving Averages (EMA). Oscillators like the Relative Strength Index (RSI) and the MACD have pointed upwards.

Therefore, the stock will likely have a bullish breakout as buyers target the key resistance point at $6. The stop-loss of this trade is about $5. 

However, in the long-term, the stock will likely have a weaker total return than the broader market. For example, in the last five years, its total return was 30% compared to VOO’s 107%.

The post Oxford Lane Capital (OXLC) has a fat 20% yield: is it a buy? appeared first on Invezz

0
FacebookTwitterGoogle +Pinterest
previous post
Suzlon Energy share price suffered a harsh reversal; what next?
next post
Pinterest stock price deep dive: buy or sell ahead of earnings?

Related Posts

DXY Index: Chart shows the US Dollar Index...

May 4, 2025

My last Nio stock price forecast was accurate:...

September 16, 2024

Noble Minerals Initiates Temporarily Delayed Drill Program in...

July 3, 2024

Trident Royalties PLC Announces Update on Scheme Timetable

July 17, 2024

Tesla Delivers Highly Anticipated Q1 Results, Musk Promises...

April 24, 2024

Opendoor stock price is tanking — but this...

May 15, 2025

Wall Street Veteran Michael Moen Joins Carmanah Minerals...

February 10, 2024

Axon Enterprises stock surged but faces one key...

January 5, 2025

LVMH share price analysis: 2 rare patterns point...

November 28, 2024

Can Lloyds share price surge to 100p after...

May 1, 2025

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Latest News

    • GMS stock jumps 29% on takeover interest from Home Depot, QXO, analysts raise PTs

      June 22, 2025
    • Japan’s rice price surge: what’s driving it and why it could spark a political crisis

      June 22, 2025
    • BofA raises STOXX 600 target amid resilient global growth, warns on Mideast risks

      June 22, 2025
    • Palantir co-founder: US must prevent Iranian nukes

      June 22, 2025
    • Fed governor Waller advocates for July rate cut amid tariff, labor market outlook

      June 21, 2025

    Categories

    • Business (3,179)
    • Investing (2,525)
    • Latest News (2,000)
    • Politics (1,530)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: americaninvesthub.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 americaninvesthub.com | All Rights Reserved