Analysts at National Securities assumed coverage on shares of XAI OCTAGON FR/COM (NYSE:XFLT) in a research report issued on Monday, October 29th. The firm set a “buy” rating and a $13.00 price target on the stock. National Securities’ price objective suggests a potential upside of 48.40% from the company’s current price.
The analysts wrote, “ We are initiating coverage on XAI Octagon Floating Rate & Alternative Income Term Trust (XFLT) with a BUY rating and $13 price target. The company is sub-advised by Octagon Credit, a leading CLO and credit investor in the US. Despite the small size of XFLT, it is worth noting that Octagon Credit has just over $20 billion of AUM and is thus able to leverage its extensive knowledge of credit markets for the benefit of XFLT shareholders. Octagon has been a top five CLO issuer since the financial crisis.
The company also is utilizing a mixed strategy of credit. The fund will opportunistically invest in corporate bonds, first lien leveraged loans, second lien leveraged loans, CLO debt, and CLO equity. The ability to toggle between these assets at times when credit spreads may vary significantly is a major advantage for XFLT, as we see it. The company will likely be able to invest more in first and second lien loans and less in CLO equity during periods of market dislocation, for example, which would enable XFLT to manage its ROE but reduce the underlying volatility of the book, thus enhancing its Sharpe ratio. To the extent credit spreads widen for technical reasons and not due to increased defaults, the company could also choose to purchase more CLO equity.
The company also has a term trust structure that ends 12/31/29. The Board is able to tender for 100% of XFLT shares at NAV (measured twelve months prior to the end of the term). This gives the company significant incentive to maintain NAV/share as we doubt the Board will be happy purchasing shares at NAV if they are trading at a material discount to NAV.
We continue to view CLO equity very favorably. As a reminder, CLO equity has the optionality to benefit from environments of spreads tightening or widening. With a five-year revolving pool of assets versus liabilities locked in for twelve years, CLO equity has a unique ability to benefit from market dislocation. Even through the past 2+ years of spreads tightening, CLO equity has been able to take advantage of refinances and resets in order to help offset the spread compression witnessed across loan markets.
We are rolling our NII/share estimates of $0.64, $0.95, and $0.89 for fiscal 2018, 2019, and 2020, respectively. We expect loan market dislocation to boost earnings in fiscal 2019. “
Shares of NYSE:XFLT traded down $0.14 during midday trading on Monday, reaching $8.76. 74,081 shares of the company were exchanged, compared to its average volume of 26,502. XAI OCTAGON FR/COM has a one year low of $8.56 and a one year high of $10.77.
In other XAI OCTAGON FR/COM news, insider Danielle Cupps acquired 5,000 shares of the stock in a transaction on Wednesday, August 29th. The stock was acquired at an average price of $9.99 per share, for a total transaction of $49,950.00. The purchase was disclosed in a document filed with the Securities & Exchange Commission, which can be accessed through this hyperlink. Also, insider Philip G. Franklin acquired 3,206 shares of the stock in a transaction on Monday, October 29th. The shares were acquired at an average price of $9.21 per share, with a total value of $29,527.26. The disclosure for this purchase can be found here. In the last quarter, insiders have acquired 16,261 shares of company stock valued at $158,241 and have sold 23,225 shares valued at $229,961.
Institutional investors have recently added to or reduced their stakes in the company. B. Riley Wealth Management Inc. bought a new stake in shares of XAI OCTAGON FR/COM in the 3rd quarter worth about $122,000. Wedbush Securities Inc. lifted its holdings in shares of XAI OCTAGON FR/COM by 44.0% in the 3rd quarter. Wedbush Securities Inc. now owns 21,023 shares of the company’s stock worth $206,000 after acquiring an additional 6,423 shares during the last quarter. First Trust Advisors LP bought a new stake in shares of XAI OCTAGON FR/COM in the 2nd quarter worth about $210,000. Clear Harbor Asset Management LLC lifted its holdings in shares of XAI OCTAGON FR/COM by 46.1% in the 2nd quarter. Clear Harbor Asset Management LLC now owns 31,925 shares of the company’s stock worth $292,000 after acquiring an additional 10,080 shares during the last quarter. Finally, Shaker Financial Services LLC lifted its holdings in shares of XAI OCTAGON FR/COM by 1,548.1% in the 2nd quarter. Shaker Financial Services LLC now owns 186,233 shares of the company’s stock worth $1,702,000 after acquiring an additional 174,933 shares during the last quarter.
About XAI OCTAGON FR/COM
There is no company description available for XAI Octagon Floating Rate & Alternative Income Term Trust.
Further Reading: Short Selling
Receive News & Ratings for XAI OCTAGON FR/COM Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for XAI OCTAGON FR/COM and related companies with MarketBeat.com's FREE daily email newsletter.