Phillip Goldstein (pictured), Andrew Dakos and Steven Samuel‘s Bulldog Investors has initiated an activist stake in Full Circle Capital Corp (NASDAQ:FULL) consisting of 1.32 million shares according to a recent filing with the Securities and Exchange Commission. The fund also disclosed that it might get in touch with the company’s management to discuss ways to increase shareholder value. Bulldog’s current stake in Full Circle Capital Corp (NASDAQ:FULL) represents 5.69% of the $82.49 million management investment company’s outstanding common stock.
The activist hedge fund, based in Saddle Brook, New Jersey was named by Goldstein to signify tenacity. From the time of its inception in 1992 with about $700,000 in capital, the fund has run more than 40 proxy fights. The idea is to attack funds selling at deep discounts to their net asset value, and force their management to narrow the margin, while shareholders bag the returns. Thus, it is no surprise that 95% of the fund’s holdings belong to the finance sector. Based on Full Circle Capital Corp (NASDAQ:FULL)’s net asset value of $4.43 at the end of March, the company’s shares are trading at a discount of more than 20%. Bulldog jumped at the opportunity to narrow that gap. Currently, Bulldog has about $619 million worth of assets under management and the market value of its public equity portfolio stood at $261.93 million at the end of the first quarter.
Bulldog Investors is a fund that we have been following for the last couple of years along with over 700 other investment firms. We follow hedge funds because our research has shown that their stock picks historically managed to generate alpha even though the filings are up to 45 days delayed. We used a 60-day delay in our back tests to be on the safe side and our research showed that the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Total Return Index by an average of 95 basis points per month between 1999 and 2012. After adjusting for risk, our calculations revealed that these stocks’ monthly alpha was 80 basis points. We have also been sharing and tracking the performance of these stocks since the end of August 2012, during which time they have returned 144%, outperforming the S&P 500 ETF by nearly 85 percentage points (see more details here).
Shares were purchased between April and June in 14 separate transactions with price per share ranging from $3.49 to $3.53. Full Circle Capital Corp (NASDAQ:FULL) pays out a monthly dividend of $0.035, which amounts to a particularly high yield of 11.63%. The stock has been taking a considerable beating and has depreciated by more than 20% year-to-date and nearly 54% over the past year, which has contributed greatly to that growing dividend yield. In comparison, the asset management industry is up by 5.9% so far this year and a hefty 17.9% over the last 52 weeks. The short interest in the company is also at the high end with 171,600 shares as of mid-May, with average daily volume being 196,800 shares.