Huge amounts of investment could soon flood into a tiny sector
of the stock market.
How do I know?
Because Van Eck Global - one of the largest fund companies in
the world - just launched a new investment product. It's called
Market Vectors BDC Income (
. As the name suggests, this ETF will track a group of Business
Development Companies or BDCs.
Now, you may not know Van Eck…
But the company has been an innovator since 1955 when Jon Van
Eck started an international mutual fund. His focus was
investing in Europe and Japan in the wake of World War II.
Those mutual funds allowed American's to profit from the
economic redevelopment in these international markets. While it
sounds quite common today, investing in European or Japanese
stocks in the 1950s was exotic.
Whenever Van Eck launches a new ETF, it pays to take
In 2006 - just one year after the launch of the exceedingly
SPDR Gold Shares (
ETF - Van Eck launched its own gold ETF.
Market Vectors Gold Miners (NYSE GDX)
provided exposure to the biggest mining stocks through a single
ETF. And in the last seven years, GDX has been the top gold stock
The fact that Van Eck is getting into the BDC space with a new
ETF highlights the growing popularity of this income
The Market Vectors BDC fund owns shares of 25 BDCs. The fund
is highly concentrated, with the top five investments comprising
38% of assets. Today, this fund is tiny - with just $14 million
BDCs themselves are a small opportunity in the world of income
In many ways, BDCs are similar to REITs and MLPs. They "pass
through" roughly 90% of profits to shareholders in dividend
payments, and are therefore able to legally avoid corporate
Compared with REITs and MLPs, there are far fewer BDC
investments. And many of those available investments are small in
Perhaps this is why Van Eck and just one other investment firm
focused on BDCs.
In 2011, banking giant Wells Fargo partnered up with
investment bank UBS to launch the
E-Tracs Wells Fargo BDC (
BDCs are slowly gaining popularity as income staved investors
seek higher yields.
I've been recommending BDCs to my
High Yield Wealth
subscribers since early 2011. These investments have risen in
value and still offer dividends of 8 - 11%...
The ETFs from Van Eck and UBS highlight the opportunity to
invest in these little known income investments. However,
both funds are diversified among a wide variety of BDCs.
Diversification can be a plus. But you must also remember that
each of these BDCs also has a diverse portfolio of loans. Which
means, buying an ETF of BDCs provides you with double the
Just as with stocks, investors will be best off hand picking
the winners, and avoiding the losers. Talented executives lead
the best BDCs, and have demonstrated an ability to manage risks
and deliver profits to shareholders in good times and
Last week I told you about
Medallion Financial (
High Yield Wealth
members today are earning an 8.2% cost basis yield. And the stock
is up 43%.
In short, I believe we're at the cusp of even bigger gains in
this tiny segment of the stock market. That will be good for
investors who already own these companies.
I think we still have an opportunity to build or add to
positions in these types of opportunities, and I'm still telling
my readers to buy.
For further reading on my favorite BDCs
click here now.