With roughly 28 years of investing experience under my belt, I find myself more and more aligned with Warren Buffett's investing philosophy. Namely, I'm constantly looking to the horizon and am unwavering when it comes to value. Many of my more than three dozen positions have been held for several years.
But with the stock market a stone's throw from its priciest valuation in history, I've struggled to find good deals. Although I've been a net seller of stocks in 2026, one of the few exceptions to this selling activity has been ultra-high-yielding business development company (BDC), PennantPark Floating Rate Capital (NYSE: PFLT). This Rare Signal Is Flashing Again.
In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue » Including the dividend reinvestment plan I've set up, my stake in the company has grown by 242% since the start of the year.
While things aren't picture-perfect for PennantPark, the catalysts, which include a 13.2% yield and a monthly payout, far outweigh the headwinds. A BDC is a company that invests in the debt and/or equity (preferred or common stock) of small- and micro-cap businesses, often known as "middle-market companies." At the end of June, PennantPark's $2.5 billion portfolio consisted of $254.3 million in preferred and common stock, with the remainder in debt securities. The obvious worry with BDCs like PennantPark is that their loan portfolios are tied to mostly unproven businesses.
If the U.S. economy weakens (e.g., the July nonfarm payroll report showed a surprise loss of 23,000 jobs), it can spark delinquencies, known as non-accruals. Wall Street and investors also have concerns about the private credit market. While many of these concerns have been tied to credit quality in the tech sector amid a breakneck artificial intelligence data center build-out, they've nevertheless impacted PennantPark and its peers.
However, I believe these fears represent the ideal attack point for patient investors. PennantPark found itself behind the proverbial eight-ball when the Federal Reserve cut interest rates six times between September 2024 and December 2025. With 90% of its portfolio in debt securities and 99% of these loans sporting variable rates, a rate-easing cycle constrained its net investment income (NII).
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