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"Old School" Bankers at Main Street
06/08/2016 7:00 am EST
When I talk about the specialty financial institution few investors have ever heard of this business development company, which is one of my favorite stock ideas, explains Mark Skousen, editor of Forecasts & Strategies.
Unlike the big commercial banks, Main Street (MAIN) survived the 2008 crisis -- and kept paying dividends. And it did not need to be bailed out or take Troubled Asset Relief Program (TARP) money.
The “bankers” at Main Street are “old school.” They avoid risky mortgage-backed securities, credit default swaps, leveraged hedge funds and other risky speculations.
Using the prudent-man rules of the past, they make money the old-fashioned way by lending to small businesses and financing family-owned enterprises seeking to expand.
Currently, MAIN has 200 active clients across the country and $3 billion in assets under management. It is a small but extremely well-run operation.
Moreover, while the big banks have billions in bad loans, less than 2% of Main Street’s portfolio is non-performing. The default rate is extremely low.
Recently an analyst specializing in income investing referred to MAIN as a “specialty bank” that pays 7% annual “interest.” I like the comparison.
He notes that few people have heard of the Main Street Capital “bank”. Indeed, it does not have branches across the country; in fact, it only has one “branch” in Houston.
The Wall Street analyst notes that some of the biggest financial firms in the nation have invested money in MAIN bank -- T. Rowe Price (PRGFX), Royal Bank of Canada (RY), Morgan Stanley (MS) and UBS Group (UBS).
And like us, they are earning a 7% yield and taking advantage of rising payouts. MAIN has increased its dividend every year for five years in a row. Now you can see why MAIN is one of the biggest positions in my personal IRA.
By Mark Skousen, Editor of Forecasts & Strategies
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