< Return to Bears page

Standard Industry Risk

• Credit default risk - the economy slows down, the rate of corporate defaults would be expected to increase, thus affecting American Capital's ability to regain their investment. Sound's familiar? - Subprime crisis
• Interest rate risk - rising interest rates would increase costs and make debt more expensive. The company has $1.8B (out of ~$4B total) in revolving credit facilities.
• The asset management and private equity business generally requires highly skilled, experienced personnel who demand high compensation. This makes operating leverage very difficult, if not impossible, so expect operating expenses to rise with revenues and earnings. ACAS' stringent vetting process only exacerbates this issue.
• Market risk - American Capital depends on both capital and credit markets to finance activities. Due to strict 1:1 debt-to-equity legal requirements, ACAS depends on raising equity in the public markets as well as leveraging that equity in the debt markets for use in future investments. A freeze-up in either/both markets could prove detrimental to operations.^[1]

1. ↑ http://www.enlightened-american.com/wealth/research/acas_report_risk.htm

Wikinvest © 2006, 2007, 2008, 2009. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.