While the group fell behind the broader markets last year, Colyer believes BDCs may have weakened along with the broader high-yield market. However, unlike other high-yield markets, BDCs lend to financially healthy borrowers.
“We think BDCs are undervalued and potentially have upside to both their dividends and share price,” Colyer said. “Insiders agree, as they have been buying up shares of some larger BDCs in the market. We doubt that insiders would be buying the shares if they expected a decrease in performance. We think insiders are telegraphing an opportunity to investors that these shares may be undervalued and have the potential to outperform in 2015.”
For more information on BDCs, visit our business development companies category.
Max Chen contributed to this article.