Ares Capital Corporation (ARCC): A Bull Case Theory 

We came across a bullish thesis on Ares Capital Corporation on R. Dennis’s Substack by OppCost. In this article, we will summarize the bulls’ thesis on ARCC. Ares Capital Corporation’s share was trading at $20.48 as of January 13th. ARCC’s trailing and forward P/E were 10.31 and 10.73 respectively according to Yahoo Finance.

Ares Capital Corporation (ARCC) stands out as a premier player in private credit, managing a $30+ billion portfolio across 587 companies with backing from 252 private equity sponsors. The company has successfully insulated itself from broader credit cycle volatility through scale, defensive portfolio construction, and counter-cyclical balance sheet management, consistently generating spillover income that underpins its 9.4% dividend yield.

Its longevity—spanning two decades, including the 2008 GFC and 2020 COVID shock—has built a resilient platform with a workout-tested restructuring team and proprietary middle-market credit database. ARCC’s scale enables it to capture jumbo unitranche deals, benefiting from cost-of-capital advantages and superior access to unsecured debt markets.

Operationally, ARCC is externally managed by Ares Management, leveraging investment expertise and the strategic aggregator Ivy Hill Asset Management (IHAM), which contributes steady dividend income and allows offloading of lower-yield assets while retaining economic benefit. Its origination process is sector-focused, emphasizing defensive industries such as software, healthcare, and professional services, ensuring strong covenant packages and cash flow visibility.

The portfolio remains well-diversified, with senior secured debt forming the core and equity positions, including IHAM, providing NAV upside. Non-accruals are low at 1.8%, and structured PIK income from IHAM supplements returns without indicating borrower distress. Financially, ARCC’s NAV per share has steadily grown to $20.01 in Q3 2025, while owner earnings suggest an attractive entry multiple of 9.8x.

Dividend coverage is supported by $1.26 per share in spillover income, offering high safety even in a severe rate-cut scenario. Structural shifts, including bank retrenchment, favor private credit, while ARCC’s incumbency and information advantage create an economic moat. With NAV stability, best-in-class management, and a 9.4% covered yield, ARCC represents a core income investment with upside to a $23.50 fair value, making it a compelling long-term BUY.

Previously we covered a bullish thesis on BlackRock, Inc. (BLK) by Kroker Equity Research in February 2025, which highlighted its diversified asset management, record inflows, and Aladdin® platform driving strong revenue growth. BLK has appreciated approximately 9.8% since coverage. The thesis still stands, while OppCost shares a similar view but emphasizes Ares Capital (ARCC)’s private credit focus, defensive portfolio, and high-yield dividends in a different financial segment.

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Disclosure: None.