Ark Invest co-founder and CEO Cathie Wood is one of the best-known growth investors in the realm of exchange-traded funds (ETFs). She also happens to be one of the most aggressive, loading up Ark Invest with high-flying and disruptive investments.
We added Oxford Square Capital Corp.'s 6.25% baby bond maturing in 2026 to our portfolio, yielding over 8%, despite inherent risks. OXSQ's credit score is solid among peers. Its strengths are in leverage and problem loans, but its weaknesses are in profitability and debt structure. Compared to ARCC, OXSQ is less diversified and stable, yet offers higher yield spreads, making it a high-risk, high-reward investment.
Trinity Capital offers stable returns through private credit markets, managing $3.8 billion in assets across five business verticals. TRIN's baby bonds, offering yields around 7.88%, are slightly mispriced, presenting a strong investment opportunity. TRIN's credit score, based on our adjusted Moody's methodology, is Baa1 equivalent, indicating strong financial health and a balanced debt structure.
Cathie Wood bounced back in 2024. The growth investor who rocked the world in 2020 with her market-thumping returns at Ark Invest has proved to be mortal in subsequent years.
Great Elm Capital Corp. (GECC) offers high-yield baby bonds, trading at an 8.9% yield, despite being one of the riskiest BDCs. GECC's mixed portfolio includes 24% equity and significant short-term treasuries, which add to its credit score despite past financial struggles. GECC's leverage structure, with no secured financing, and a 50% debt/assets ratio aligns with industry norms, making its bonds attractive for high-yield seekers.
The yield curve is normalizing, and we aim for 8%+ yields with low downside deviation in our low-duration portfolio. OCCI has higher leverage and worse credit metrics compared to ECC and OXLC, but its preferred stock, OCCIN, offers an 8.5% YTM. Despite OCCI's lower credibility, OCCIN's low duration and yield make it a viable addition for diversification in our low-duration portfolio.
Runway Growth Finance Corp. offers baby bonds with yields above 8%, making them attractive for low-duration portfolios. RWAY's financial strength is comparable to that of investment-grade issuers in the sector. Its profitability and asset coverage are strong, but there are concerns about debt maturities and problem loans. Both bonds trade below par, and their yields are sensitive to market movements; strategic trading can maximize returns.
The yield curve is normalizing, making shorter-term yields lower than long-term yields, and we expect short-term yields to decrease further by 2025. We recommend the OXLCP preferred shares from Oxford Lane Capital Corporation for our low-duration portfolio due to its 8.44% yield and lower risk profile. OXLC's fixed-income securities have decent credit ratings despite high leverage costs, making them attractive for high-yield, low-duration investments.
Eagle Point Income Co.'s 8.0% Series C Term Preferred Stock offers an attractive yield and strong protection due to its CLO-Debt-heavy portfolio. EICC pays an 8% annual cumulative dividend, has a maturity date in 2029, and is currently trading with a Yield to Maturity of 8.22%. The company's capital structure and mandatory asset coverage covenants provide confidence in the preservation of principal for preferred stock investors.
Cathie Wood is one of the most closely followed investors on Wall Street. As CEO of ARK Invest, Wood has made a name for herself mostly from her high-conviction narratives around up-and-coming (albeit sometimes speculative) companies looking to disrupt legacy incumbents.
Cathie Wood's aggressive growth style of investing may have fallen flat earlier this year, but the co-founder, CEO, and ace stock picker at Ark Invest has been on a roll lately. Ark's most popular exchange-traded fund has soared 25% over the past three months and 36% over the past six months.
Even the perpetually moving Cathie Wood takes a step back over the holidays. The co-founder, CEO, and investment manager for Ark Invest has been slowing the pace of her portfolio moves lately.