Is ARCC a good stock to buy? We came across a bullish thesis on Ares Capital Corporation on Compounding Dividends’s Substack by TJ Terwilliger. In this article, we will summarize the bulls’ thesis on ARCC. Ares Capital Corporation’s share was trading at $19.10 as of April 22nd. ARCC’s trailing and forward P/E were 10.19 and 9.82 respectively according to Yahoo Finance.
Ares Capital (ARCC) stands as the largest business development company, leveraging its unmatched scale in the private credit market to originate and structure deals that smaller peers cannot access, creating a durable competitive advantage. As a result of its size, ARCC benefits from superior diversification across more than 600 portfolio companies, significantly reducing idiosyncratic credit risk and ensuring that the failure of any single borrower does not materially impair overall performance.
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Since its IPO in 2004, the company has consistently delivered returns that have outperformed both the S&P 500 and the broader BDC index, reflecting disciplined underwriting and a resilient credit platform across cycles. Its scale also provides meaningful funding advantages, as ARCC is able to access debt capital at lower borrowing costs than competitors, which directly enhances net interest margins and expands profitability. This structural edge becomes particularly valuable in tighter credit environments where funding efficiency determines deal competitiveness.
From a valuation perspective, ARCC appears attractive, trading at a price-to-NAV of 0.91x, implying the market is valuing the portfolio below its intrinsic net asset value despite its stability and earnings visibility. In addition, the company offers a compelling 10.6% dividend yield, supported by recurring cash flows from a diversified loan book, making it a strong income-oriented investment.
With its scale-driven moat, long-term track record of outperformance, strong portfolio diversification, and discounted valuation relative to underlying assets, Ares Capital presents a compelling risk-reward opportunity for investors seeking stable high-yield exposure to private credit markets with resilient income generation across cycles
Previously, we covered a bullish thesis on BlackRock, Inc. (BLK) by Kroker Equity Research in February 2025, which highlighted AUM scale, ETF leadership, Aladdin platform respectively. BLK’s stock price has appreciated by approximately 7.09% since our coverage. TJ Terwilliger shares a similar view but emphasizes on scale-driven private credit advantages, portfolio diversification, and high-yield income generation in Ares Capital’s model.
Ares Capital Corporation is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held ARCC at the end of the fourth quarter which was 24 in the previous quarter. While we acknowledge the risk and potential of ARCC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ARCC and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
