Following a stock’s recent trend, which can go in either direction, is what momentum investing is all about, according to the concept. Long-term investors will effectively be “buying high with the expectation of selling much higher,” as the saying goes. Take advantage of price trends in a company is critical for investors who follow this process; once a stock established a path, it is more than likely to continue in that way. The idea is that once a stock begins to follow a predetermined course, it will result in timely and profitable trading opportunities.
It’s also crucial to remember that Style Scores are intended to be used in conjunction with the Zacks Rank, our stock rating methodology that has a proven track record of outperformance in the stock market. Prospect Capital is presently ranked #2 in the Zacks Investment Research database (Buy).
Over the course of a one-month period, our research shows that companies with a Zacks Rank #1 (Strong Buy) or #2 (Buy) and Style Scores of A or B outperform the market.
Are You Prepared to Outperform the Market?
To illustrate why this business development company has the potential to be a strong momentum option, let’s look at some of the components of PSEC’s Momentum Style Score, which highlight why this business development company shows promise as a solid momentum pick.
A solid way to gauge a stock’s momentum is to check at its short-term price action, which can indicate both current interest and whether buyers or sellers are now in the driving seat. It is also beneficial to compare a security to its industry, as doing so can assist investors in identifying the most successful companies in a certain sector.
If you had invested $1,000 in Prospect Capital stock a year ago, the following is how much you would have now.
Investors who have held equities in the last year have generally seen significant returns. In particular, In fact, the SPDR S&P 500 (NYSE:SPY) has generated a total return of 39.1 percent over the last 12 months. However, there is little doubt that certain well-known equities outperformed others during the course of the year.
Business Development Company Prospect
Capital Corporation has had a stellar year, and it is one of the best-performing companies in the industry (NASDAQ:PSEC).
Prospect Capital and many other business development companies (BDCs) are unique investments in that most investors are more concerned with the yields they provide than with the value of their stock. Prospect’s stock price has increased by only 4.8 percent over the past five years, but its total return has increased by 84.2 percent as a result of its 8.6 percent dividend yield.
After the Federal Reserve announced an emergency rate drop in March of 2023, the yield on the prospect got even more enticing. Apart from dividend-paying equities, investors have few options when it comes to obtaining high-quality yields these days.
Prospect’s yield is as safe as the underlying business since, by law, business development companies must distribute at least 90 percent of their taxable income to investors in the form of dividends. The organisation owns private debt and stock in more than 120 different companies across 39 different industries, allowing investors to benefit from a highly diversified source of dividend income.
Prospect Shares Trading
Prospect shares were trading for $6.47 per share at the start of the year 2020. Because of the COVID-19 virus spreading in China, investors became concerned about a pandemic in the United States, and the stock fell as low as $5.56 at the beginning of March as a result.
It was on April 3 that Prospect shares hit a new all-time low of $3.68, just a few days after the rest of the market recovered from its March lows. Although Prospect suffered a setback at that point, the stock recovered to reach as high as $5.79 by early June, riding the general market’s upward trend. Since then, the potential rally has been stopped for several months, with the stock price oscillating around the $5 level until around the middle of November. Fortunately, investors were still receiving a hefty dividend as compensation for their perseverance.
In 2021 and beyond, there is potential: Prospect experienced a breakout to the upside in January 2021, rising as high as $8.03 per share in February of that year. Since then, the stock has continued to rise in value, reaching a high of $9.25 in June of this year.
One unexpected driver of the company’s performance may be the popularity of the stock among Robinhood users. AMC Entertainment Holdings Inc (NYSE:AMC) and Sundial Growers Inc (NYSE:SDG) are two examples of high-risk, speculative investments that Robinhood investors are passionate about (NASDAQ:SNDL). Prospect, on the other hand, is one of the top 100 holdings among Robinhood customers, who are likely attracted to the stock because of its large yield and low share price.
How Frequently Does Prospect Capital Distribute Dividends?
Summary of Dividends
Typically, there are 12 dividends paid out per year (excluding special dividends), and the dividend cover is roughly 1.1.conclusion
Prospective investors who purchased one year ago and held on until now have received considerably more than a dividend as a result of their efforts and patience. In fact, assuming dividends are reinvested, a $1,000 investment in Prospect stock made on July 12, 2020 would be worth almost $1,957 today.
Looking ahead, the one analyst who follows the stock anticipates a decline in the stock price over the next 12 months. Prospect’s price objective is $6, which implies a 28.6 percent decline from present levels, according to the lone analyst who covers the stock.
While many investors search for momentum inequities, determining what constitutes momentum can be difficult. There is a great deal of discussion about which metrics are the most important to pay attention to and which are low-quality indicators of future performance.
The Zacks Momentum Style Score, which is a component of the Zacks Style Scores, assists us in addressing this issue. Following is a look at Prospect Capital (PSEC), which has a Momentum Style Score of B at the time of this writing. As well as price movement and earnings estimate revisions, we will explore some of the most important factors of the Momentum Style Score (such as volatility).
Jonathan Herrod is a content writer who enjoys writing about technology, video games, and other topics. The author of informative articles that are well-researched and written with attention to detail has been writing professionally for nearly three years and specializes in the creation of well-researched and written attention to detail articles.