Back to top

Image: Bigstock

Why You Should Retain Owl Rock Capital (ORCC) in Your Portfolio

Read MoreHide Full Article

Owl Rock Capital Corporation (ORCC - Free Report) has been in investors' good books owing to its healthy revenue stream and a solid portfolio.

The company concluded 2020 with investments in 119 portfolio companies with an aggregate fair value of $10.8 billion. It continues to seek opportunities in stable, large and recession-resistant businesses.

Its return on assets — a profitability measure — stands at 5.1%, higher than the industry's average of 2.8%. This reflects the company’s efficiency in utilizing its shareholders’ funds.

Now let’s see what makes this stock an investor favorite.

Owl Rock Capital has been witnessing a surge in revenues since its inception in 2015. Its 2016-2020 CAGR of 129.4% is pretty impressive. In 2020, it gained on the back of an expanded investment portfolio. A steady rise in revenues, primarily from the company’s rapidly-growing interest income and growth strategies, is likely to pave the way for long-term growth.

Management also declared that the company will be entering the public market through business combination with Baltimore Acquisition Corp, a special purpose acquisition company.

The company flaunts great solvency level with $2.1 billion of liquidity. Total debt of the company accounts for 47.9% (in line sequentially) of its capital, lower than the industry average of 58.7%. The available cash and credit facility together is lower than its debt of $5.4 billion. However, it added commitments to its senior security revolver of more than $1.3 billion. Nevertheless, the company doesn’t have any debt maturities until December 2022.

On the back of its capital position, Owl Rock Capital deploys capital to enhance shareholder value. It recently announced a dividend for the fourth quarter of 2020. It paid six special dividends apart from the regular ones in the fourth quarter. Its dividend yield stands at 8.7%, much higher than its industry's average of 1.2%. This should instill investors’ confidence in the stock.

However, new investment commitments have been declining over the past few quarters, which is a concern. In 2020, the same fell 22.6% year over year.

Shares of this currently Zacks Rank #3 (Hold) company have gained 25.8% in a year’s time, underperforming the industry's growth of 34.7%.

This looks better than the price performance of other companies in the same space, such as, HoulihanLokey, Inc. (HLI - Free Report) , Virtu Financial, Inc. (VIRT - Free Report) and Jefferies Financial Group Inc. (JEF - Free Report) , which have also soared 46%, 42.2%, 117.5%, respectively, over the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 77 billion devices by 2025, creating a $1.3 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 4 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2022.

Click here for the 4 trades >>