Managing Director Christopher Nolan of MLV & Co says Main Street Capital Corporation (MAIN) has one of the strongest management teams in the sector, and is trading at roughly 1.6 times NAV while offering an 8% dividend yield.
“They tend to focus on smaller, lower-middle market companies which are often family-owned, and they are going through some sort of transition. Either the entrepreneur who founded the company is looking to retire or getting a divorce or something. They are looking to sell or pass it on to the next team,” Nolan said.
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Nolan says generally these companies have stable management teams, occupy a stable defensible industry niche and have good cash flow generation. Main Street‘s stock, he adds, benefits from the capital gains, which drives growth in NAV per share.
“Main Street Capital offers to invest both debt and equity and becomes a significant shareholder, which enables them to help grow the company,” Nolan said. “[Main Street has] grown NAV per share, which is equivalent to book value per share, well above the industry average for the last several years, so it’s a name which offers an attractive dividend and NAV per share growth. I have a price target of $37, which is achievable in the next year or so.”
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