Group 1 - New Mountain Finance (NMFC) shares increased by 5% to close at $8.58, following a period of 10.7% loss over the past four weeks, indicating a significant recovery in trading volume [1] - The rise in NMFC shares is attributed to positive market sentiment driven by U.S. Small Business Administration reforms, which aim to reduce regulatory barriers and encourage private capital investment in critical industries, thereby enhancing lending activity for SBIC-focused companies [2] - NMFC is expected to report quarterly earnings of $0.32 per share, unchanged from the previous year, while revenues are projected to decline by 13.6% to $78.84 million [3] Group 2 - The consensus EPS estimate for NMFC has remained stable over the last 30 days, suggesting that stock price movements may not sustain without trends in earnings estimate revisions [4] - NMFC holds a Zacks Rank of 3 (Hold), indicating a neutral outlook, while another company in the same industry, Nuveen Churchill Direct Lending Corp. (NCDL), also holds a Zacks Rank of 3 and has seen a 2.8% return over the past month [4][5]

Core Viewpoint - The article emphasizes the importance of a diversified investment portfolio that includes both dividend and growth stocks, particularly focusing on European small-cap companies with a 5-7 year investment horizon [1]. Group 1: Investment Strategy - The investment group European Small Cap Ideas is dedicated to providing exclusive research on attractive investment opportunities in Europe, particularly in the small-cap sector [1]. - The strategy includes two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, aimed at generating capital gains and dividend income for continuous cash flow [1]. Group 2: Features and Offerings - The investment group offers weekly updates and educational content to enhance understanding of European investment opportunities [1]. - An active chat room is available for discussions regarding the latest developments in the portfolio holdings, fostering community engagement among investors [1].

Core Viewpoint - New Mountain Finance Corporation will release its financial results for the quarter and year ended December 31, 2025, on February 24, 2026, after market close, followed by an earnings conference call on February 25, 2026 [1]. Group 1: Financial Results Announcement - The financial results for the quarter and year ended December 31, 2025, will be announced on February 24, 2026 [1]. - An earnings conference call and webcast will take place on February 25, 2026, at 11:30 am Eastern Time [1]. Group 2: Conference Call Participation - Participants can join the live earnings conference call using specific dial-in numbers provided for both the United States and international callers [2]. - To avoid delays, participants are encouraged to join at least fifteen minutes prior to the start of the call [2]. Group 3: Company Overview - New Mountain Finance Corporation focuses on providing direct lending solutions to U.S. upper middle market companies backed by top private equity sponsors [3]. - The company's investment objective is to generate current income and capital appreciation through senior secured loans and select junior capital positions in growing businesses within defensive industries [3]. - New Mountain Capital, the parent firm, manages approximately $60 billion in assets, leveraging deep sector knowledge and operating resources for its investment approach [3].

Core Viewpoint - The Zacks SBIC & Commercial Finance industry is facing challenges due to declining interest rates, which may lead to margin compression and lower investment income, while asset quality remains at risk from prolonged high rates affecting borrowers' repayment ability [1][6]. Industry Overview - The Zacks SBIC & Commercial Finance industry consists of companies providing financing to small and mid-sized privately held firms, often underserved by traditional banks [3]. - These companies offer customized financing solutions, including senior debt instruments and equity capital, targeting firms undergoing ownership changes, buyouts, and growth initiatives [4]. Key Themes Declining Interest Rates - The Federal Reserve reduced interest rates three times in 2025, bringing the current range to 3.50–3.75%, following a 100-basis-point cut in 2024 [5]. - Many industry players have floating-rate loans, leading to lower loan yields and impacting net investment income [5][6]. Asset Quality - The COVID-19 pandemic initially raised concerns about asset quality, but government stimulus and business reopenings helped maintain economic growth and prevent significant delinquency increases [7]. - However, prolonged high interest rates may weaken asset quality as portfolio companies struggle to service their debt, compounded by geopolitical risks and tariff uncertainties [8]. Regulatory Changes - The 2018 amendment to the Investment Company Act of 1940 allowed SBIC companies to increase their debt-to-equity leverage from 1:1 to 2:1, enhancing funding flexibility and growth opportunities [9]. Industry Performance - The Zacks SBIC & Commercial Finance industry ranks 181 out of over 240 Zacks industries, placing it in the bottom 26% [10]. - The industry's earnings estimates for 2025 and 2026 have been revised down by 7.4% and 17.3%, indicating a loss of confidence in growth potential [12]. Market Performance - Over the past year, the industry has underperformed the S&P 500, with a collective loss of 15.6%, while the S&P 500 and Zacks Finance sector gained 17.3% and 14.1%, respectively [14]. - The industry's trailing 12-month price-to-tangible book (P/TB) ratio is 0.90X, significantly lower than the S&P 500's 13.05X and the Zacks Finance sector's 6.19X [16][17]. Company Highlights New Mountain Finance Corp. (NMFC) - NMFC focuses on providing direct lending solutions to upper middle market companies, with corporate investments ranging from $10 million to $125 million [18]. - The company has seen growth in total investment income and is expected to continue this trend, despite potential pressures from lower rates [19]. - As of September 30, 2025, NMFC had total statutory debt of $1.59 billion and cash equivalents of $63.7 million, with a market cap of $940.8 million [20]. Runway Growth Finance Corp. (RWAY) - RWAY provides senior secured loans and equity components to growth-stage companies, primarily in technology, healthcare, and business services [21]. - The company has experienced steady growth in total investment income and is expected to maintain this momentum, supported by a solid balance sheet [22]. - As of September 30, 2025, RWAY had $371.9 million in liquidity and a total investment portfolio valued at $946 million, with a market cap of $339.3 million [23][24].

Industry Overview - The Zacks SBIC & Commercial Finance industry provides financing to small and mid-sized privately held firms, often underserved by traditional banks, focusing on customized financing solutions such as senior debt and equity capital [3] - The industry targets firms in financial distress, offering products like mezzanine loans that typically pay high interest rates and can convert into equity [3] Key Themes - **Declining Interest Rates**: The Federal Reserve has lowered interest rates three times in 2025 to a range of 3.50–3.75%, following a 100-basis-point cut in 2024. This decline is expected to compress loan yields for many industry players with floating-rate loans, negatively impacting net investment income, although loan origination and refinancing activities may improve due to rising demand [4] - **Asset Quality Concerns**: Prolonged high interest rates may weaken asset quality as portfolio companies struggle to service debt. Geopolitical risks and tariff uncertainties further strain asset quality for SBIC & Commercial Finance companies [6] - **Regulatory Changes**: The 2018 amendment to the Investment Company Act eased leverage limits for SBICs, allowing a debt-to-equity ratio increase to 2:1, which provides funding flexibility and growth opportunities for these companies [7] Industry Performance - The Zacks SBIC & Commercial Finance industry ranks 181 out of over 240 Zacks industries, placing it in the bottom 26%, indicating underperformance in the near term [8] - The industry has collectively lost 15.6% over the past year, underperforming the Zacks S&P 500 composite, which has gained 17.3%, and the Zacks Finance sector, which has increased by 14.1% [11] Valuation Metrics - The industry has a trailing 12-month price-to-tangible book (P/TB) ratio of 0.90X, significantly lower than the S&P 500 composite's 13.05X and the Zacks Finance sector's 6.19X, indicating a substantial discount compared to the broader market [14][16] Company Highlights - **New Mountain Finance Corporation (NMFC)**: A specialty finance firm focusing on upper middle market companies, NMFC has seen growth in total investment income and is expected to continue this trend due to regulatory changes and rising demand for customized financing. As of Sept. 30, 2025, NMFC had total statutory debt of $1.59 billion and a market cap of $940.8 million [19][21] - **Runway Growth Finance Corp. (RWAY)**: This company provides senior secured loans to growth-stage companies, showing steady growth in total investment income. As of Sept. 30, 2025, RWAY had $371.9 million in liquidity and a market cap of $339.3 million [23][26]

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Investment Strategy - The investment approach focuses on high-quality dividend stocks and assets that provide long-term growth potential, which can significantly contribute to income generation [1]. - The strategy aims to create a balanced portfolio that captures total returns on par with the S&P 500, demonstrating the effectiveness of blending growth and income investments [1].

Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Group 1: Investment Strategy - The company advocates for a diversified approach to investing, focusing on high-quality dividend stocks that provide long-term growth potential [1]. - A hybrid system is proposed, blending growth and income strategies to optimize investment returns [1]. - The total return achieved through this strategy is reported to be on par with the S&P index, indicating its effectiveness [1].

Core Viewpoint - New Mountain Finance Corporation (NASDAQ:NMFC) is recognized for its high dividend yield, but recent performance has led to a lowered price target and a neutral rating from analysts [1][2]. Financial Performance - In Q3 2025, NMFC reported net investment income of $33.9 million, equating to $0.32 per weighted average share, with credit performance remaining stable as approximately 95% of the portfolio is rated green [3]. - The company experienced a modest origination period, with $127 million in new assets being offset by $177 million in repayments [4]. Strategic Initiatives - NMFC's board has approved a new share repurchase program valued at $100 million, indicating a focus on returning capital to shareholders [4]. - The company is also exploring the potential sale of up to $500 million of its assets to a third party, which could significantly advance its strategic goals [4]. Market Position - NMFC specializes in providing direct lending solutions to US upper mid-market companies, supported by leading private equity sponsors [5].

Financial Data and Key Metrics Changes - Adjusted net investment income for Q3 2025 was $0.32 per share, covering the $0.32 per share dividend paid on September 30 [5] - Net asset value per share declined by $0.15 compared to Q2, now at $12.06, due to modest declines across four investments [5][15] - Total investment income for the quarter was $80 million, a 4% decrease compared to the prior quarter [26] - Total net expenses decreased by 5% to $47 million, including a fee waiver [27] Business Line Data and Key Metrics Changes - NMFC's portfolio loan-to-value stands at 45%, with a focus on defensive growth sectors such as healthcare and IT [6][24] - Senior-oriented assets increased to 80% of the overall portfolio, up from 78% in the prior quarter [12][23] - The average yield of NMFC's portfolio decreased slightly to 10.4% due to lower yields on originations compared to repayments [24] Market Data and Key Metrics Changes - The direct lending market remains attractive, with stable spreads despite a lack of significant M&A activity [19][20] - Most unitranche loans are pricing at SOFR plus 450-500 range, indicating a stable pricing environment [20] - Approximately 80% of investments are senior in nature, reflecting a shift towards lower-risk assets [23] Company Strategy and Development Direction - NMFC aims to improve the quality and diversity of its asset base while optimizing liabilities and enhancing income quality [12] - The company is exploring a portfolio sale of up to $500 million to diversify its portfolio and reduce PIK income [7][8] - NMFC's management emphasizes shareholder alignment, with 14% of outstanding shares owned by employees and senior advisors [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the deal environment improving in Q4 and 2026, with expectations of increased repayments [36] - The company remains committed to maintaining leverage within a target range of 1 to 1.25 [26][36] - Management is focused on reversing unrealized depreciation within the existing portfolio and recovering full principal value on challenged investments [17][58] Other Important Information - NMFC has fully utilized a $50 million stock repurchase program, repurchasing approximately $47 million in shares at an average price of $10 [7] - The company has a diversified portfolio across 127 companies, with the top 10 single-name issuers accounting for 26% of total fair value [25] Q&A Session Summary Question: Regarding the potential portfolio sale - The sale will focus on the largest positions to diversify the portfolio and reduce PIK income, including both PIK and cash-yielding names [34] Question: On the buyback strategy - The company aims to stay within leverage levels while potentially using repayments to buy back stock if conditions allow [36] Question: About deployment capacity and strategy - NMFC remains active in the market but is prioritizing share repurchases due to leverage considerations [41] Question: On the potential secondary sale and use of proceeds - Proceeds could be used for debt repayment, stock repurchases, or new loans to diversify the portfolio [44] Question: Concerns about other portfolio positions affected by tariffs - The portfolio is well-positioned against tariff impacts, with Beauty Industry Group being the only significant exposure [55] Question: On the performance of Admentum - Admentum's performance is stable, and the company is working on targeted M&A to grow the business [67]

Financial Performance - Q3 2025 adjusted net investment income (NII) was $032 per share, covering the dividend of $032 per share[12] - September 30, 2025 net asset value (NAV) was $1206 per share, compared to $1221 per share as of June 30, 2025[12] - The company repurchased approximately $47 million of NMFC shares year-to-date at a weighted average purchase price of $1002 per share[12] - The company announced a new $100 million board authorized share buyback program[12] Portfolio Composition and Risk - Approximately 95% of the portfolio is rated green on the company's heatmap[12] - Approximately 80% of the portfolio is senior in nature, including First Lien, SLPs, and Net Lease[12] - The fair value of investments was $29571 million as of September 30, 2025[14] - The current yield at cost was 110% and the yield to maturity (YTM) at cost was 104%[14] Strategic Initiatives - The company is exploring a secondary portfolio sale of up to $500 million of assets to a third party to further strategic initiatives[12] - New Mountain employees continue to be the largest shareholders of the company, with ownership of approximately 14%[12]