This Top Insider just increased his appetite for Ares Capital Stock

Ares Capital (CRAC) revealed that its co-chairman, Michael Lewis Smith, had increased his stake in the company. The closed-end, non-diversified investment company generates both current income and capital appreciation through debt and equity investments.

On May 24, Smith made an informational purchase of 54,000 shares for $18.64 per share, bringing the total value of the transaction to $1 million. After his move, Smith’s total holding in the company’s stock now stands at $4.34 million.

Based on informative trading by two insiders over the past three months, TipRanks’ insider trading activity tool shows that confidence in Ares Capital is currently positive. Additionally, insiders purchased shares worth $1.1 million during this period.

Short-term outlook

Last month, Ares Capital reported its first quarter 2022 results. Investment income climbed 12.8% year over year to $440 million. Basic earnings were $0.42 per share, down 1 cent from the same quarter last year.

As of March 31, 2022, the fair value of the company’s portfolio investments was $19.5 million, down 2.6% sequentially.

The company’s performance should be affected in the short term, as high inflation and market volatility are expected to widen its credit spreads.

Still, the acquisition of Analog Capital Management’s $2.4 billion direct loan portfolio should boost its holding company, Ivy Hill, and generate higher revenue.

Stock Valuation

Last month, Truist Financial analyst Michael Ramirez lowered Ares Capital’s price target to $22 from $23 while maintaining a Buy rating. The price target implies a potential upside of 20.2% from current levels.

Overall, the stock has a Strong Buy consensus rating based on six unanimous buys. ARCC’s average price prediction stands at $22.33, implying 22% upside potential.

Smart Score

Ares Capital earns a “Perfect 10” from TipRanks’ Smart Score rating system, indicating the stock has strong potential to outperform market expectations.

Conclusion

The co-chairman’s decision to increase his stake demonstrates his confidence in the company’s growth plans.

Insider trading activity makes it easy to quickly find and track insider moves, which are well represented by TipRanks Insiders’ Hot Stocks tool.

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Sallie R. Loera