It Became Legal Yesterday

Yesterday, May 16, 2016, was a significant day for investors, especially non-accredited investors. First, let me give you some background.

Up until yesterday, if you wanted to invest in private equity, venture capital, or startups, you basically had to be an accredited investor. An accredited investor is anyone who earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years, and reasonably expects the same for the current year, OR has a net worth over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

With these very high thresholds, most investors were excluded from participating hot private deals, especially pre-IPO investments. However, with the implementation of Title III of the JOBS Act (Jumpstart Our Business Startups Act), the rules have changed giving all investors more of a level playing field for investing in private equity offerings. 

As an example, if you have a net worth or income less than $100,000, you can invest the lower of either $2,000 or 5% of your annual income or net worth. Yet, there is a $2,000 floor, so you can invest a minimum of $2,000 per year without regard to your annual income or net worth.

This is similar to crowdfunding, yet instead of the contributor getting a product or being invited to a launch party, they receive equity in the company. 

It is not just the small and medium size investors who benefit, the small startups will now have a lot of advantages. such as simplified financial disclosures and streamlined filings, as long as the amount raised  is less than $1 million. 

If you feel so inclined to read the actual Securities and Exchange Commission Summary of Title III, you can read it here. 

Some of the top equity crowdfunding platforms include CircleUp, RockThePost, MicroVentures, AngelList, and FoundersClub. 

The Venture Capital Conundrum

Venture Capital Actuarial Tables

The VC Conundrum

Guest article: By Ray Zinn
Author of Tough Things First: Leadership Lessons from Silicon Valley's Longest Serving CEO

It is not that all VCs are bad, it’s just that not many VCs are good.

Entrepreneurs need money to launch a business, and here in Silicon Valley there are endless lines of founders queuing in front of an endless line of venture capitalists (VCs) with money to invest. Yet the question entrepreneurs far too rarely ask is if VC money is a good thing. Nor do they ask if one or another VC has the correct long-term interest in the founders, their vision or their company.

VCs, a necessary anomaly

So what is the purpose of VCs?  They exist to insert money into companies during their earliest years. It takes cash to start a company, but VC cash is only one possible source. The three primary means for raising starting cash include:

• Founders use their own personal assets and resources (friends, family, etc.)
• They borrow without exchanging equity and power, through a bank loan secured against personal assets.
• They come, hat in hand, to VCs pitch parties.

This is where VC money becomes a Faustian temptation. Most founders lack the personal resources required to launch a company, to hire staff, and to feed the development, marketing, sales and support processes. Like most people, founders’ assets are otherwise occupied – tied up in our homes, retirement accounts, kids’ college funds, investments, and personal property.

This creates a very uncomfortable situation for anyone with common risk aversion. Risking a lifetime of work and savings is unappetizing. So founders are all too willing to trade equity and the collateral authority for financial help. Given that banks are typically loath to finance startups with thin track records, they rarely do (I secured bank financing to launch Micrel, a semiconductor company, a rarity that few can imagine). Even if banks are willing to lend, founders are often unwilling to secure these loans with their hard-earned assets. Under those rare circumstances where the bank and the founder are willing, the bank often offers less than is actually necessary to sustain the startup.

Let’s face it, startups are extremely risky.  Statistics show that fewer than 10 percent of them live longer than three years … though the odds of failure might well diminish if founders had their assets on the line.

VC Actuarial Conundrum

Would you make an investment if you knew that there was a 90 percent chance that it would fail?

VCs do. VCs are, by definition, gamblers. They know the odds and continue rolling the dice day in and day out on the long shot that one in ten investments will pay well enough to balance out the other nine. And they pray for the lottery-level odds that number ten is the next Google. When a VC says he is betting on your company, he means it quite literally.

VCs do stack the odds in their favor to some degree, but the process reduces the odds, a great outcome for founders. VCs know that to make an investment more likely profitable involves selling the portfolio company to a much larger entity. And Silicon Valley is not at a loss for mammoth companies who consume smaller companies for intellectual property and talent.

To make these companies “valuable” enough to balance books, VCs push founders to “grow” their companies at blinding speed, assuring the startup CEO that more cash is available for ongoing operations (for another hunk of equity, of course). Grow, gather cash, grow, gather cash – this is the life of a startup CEO. The growth is artificial, often producing unsustainable companies, but with some demonstrated technology and a patch of market traction. Properly fluffed, and with associated valuations of unrealistic natures, VC portfolio companies are corralled, auctioned off to the highest bidder, and slaughtered.

VCs, Egos and Actuaries

Many (perhaps most) venture capitalists believe they provide some special sauce that grants them the ability to beat the early-investor odds. They believe their investment success ratio will be exactly opposite of the real world – that they will win nine out of every ten bets.

Their strategy is flawed.  Actuary tables for humans are statistically calculable and accurate, thus everyone buys into insurance industry stats.  VC actuary tables are at best inaccurate, and at worst a poor man’s bet. A life insurance company using VC actuary statistics would have to charge premiums that exceed what rational people would pay.

Which is what founders do. By switching from being leaders to being money hunters, by trading control for cash, by not paying attention to their company, customers and culture as their principal priority, they pay huge premiums betting they won’t die. Yet by giving away control to VCs, and following their lead concerning the perpetual money hunt, they all but guarantee their demise.

Since business failure rates are high, many founders are acutely risk-averse. Without excellent native leadership and management skills, the odds are against them.  But being an entrepreneur is such a tremendous lure that feisty founders expect to beat the odds. Often it is only their manic vision and relentless drive that pushes past the pits of failure.

However, this does not change their risk-averse mentality. As I formulate my mentoring process, which is tied to my investments, I talk to many founders. An acid test question I ask of each man and woman is if they are willing to put up some of their own money for the venture. Thus far all have declined.  Just last week a couple of gentlemen approached me, wanting to start a high-tech company. Their initial assessment was that they needed half a million dollars. After reviewing their business plan and counseling them accordingly, they moved their go-to-market plan out by two years and decided they needed nearly four million dollars. They also assumed than none of the risked capital would be theirs.

Fortunately for them, I have extensive executive experience in the markets in which they want me to invest – something no VC can contribute. Having launched a successful company, having had thirty-six nearly consecutive profitable years, having survived five major industry downturns, I can help guide a portfolio company’s rational growth.

This is where, I believe, not all VC funds are good.  VCs lack the executive expertise to fully understand the risk and capability within a startup. I know that the two gentlemen I interviewed were involved in three other startups over the past fifteen years – and all but one failed miserably. Their most recent startup raised over $300M in venture capital funding and now, eight years later, the company is still seeking venture capital while generating less than $5M in revenue per year. 

With $300 million in financing, one would assume their VCs would provide a rich assortment of advisors with expert insight into their company’s industry, markets, niche segments and operations. But they didn’t. These two gentleman claim that their VCs told them to spend the money as quickly as possible so that they could get a head start or jump on the competition.

A sprint that led to a corporate heart attack.

Three years ago Micrel had the opportunity to purchase Dicera, a MEMs semiconductor company. Dicera was launched in 2003. By the end of 2013 they had raised over $72M in venture capital funds but were turning less than $6M a year in revenue.  Micrel purchased Dicera for a little over $7M. We bought a VC-backed company for a dime on the dollar.

Founders Skew the Actuarial Tables

This is the foul legacy of VC-funded startups – they miss their business plan objectives by an order of magnitude. Without experienced perspective, founders misestimate all. Things take longer, they cost more than budgeted, and markets are tougher to crack than anticipated. With all this working against them, VCs pushing for unsustainable growth merely exacerbate underlying problems. This creates greater portfolio fragility, and oddly causes VCs to place wilder bets on the hopes that they can saddle a unicorn.

But it doesn’t have to be this way. High-flying Silicon Valley software startups are getting most of the VC cash, and not enough payoff. Meanwhile, the same companies – and those in less favored industries – are finding that without mentorship, their ships sail slowly and sink quickly.

Yet we may see a few VCs doing business differently. They will have qualified councilors with industry experience who expertly guide startups. They don’t shoot for rapid yet unsustainable growth, but instead count on forming enduring companies. They insist that founders take risks, with their own assets as part of a grander, longer-term marriage. In short, the new VC may be seen as the anti-VC.

Not all VCs are bad, but not all VCs are good. Choose wisely.

Raymond D. “Ray” Zinn is an inventor, entrepreneur, and the longest serving CEO of a publicly traded company in Silicon Valley. He is best known for creating and selling the first Wafer Stepper (an industry standard piece of semiconductor manufacturing equipment), and for co-founding semiconductor company, Micrel (acquired by Microchip in 2015), which provides essential components for smartphones, consumer electronics and enterprise networks. He served as Chief Executive Officer, Chairman of its Board of Directors and President since Micrel’s inception in 1978 until his retirement in August 2015. Zinn’s philosophy on people, servant leadership, humanistic management and the ethics of corporate culture are credited with Micrel’s nearly unbroken profitability. Zinn also holds over 20 patents for semiconductor design.

His new book, Tough Things First (McGraw Hill), is now available for ordering.

Top High Yield Business Development Companies

Investing in Business Development Companies is a way for the smaller investor to get in on the ground floor of private equity deals and venture capital opportunities. This type of company, also known as a BDC, is similar to a publicly traded private equity fund. These companies invest or lend money in smaller private businesses, with a goal of increasing sales and profits in order to sell the company or go public with an IPO.

Many private equity companies are registered as BDCs for tax advantages, since corporate income taxes can be avoided if at least 90% of profits are paid out as taxable dividends to investors. Normally, these deals are only available to major institutions and multimillionaires. Private equity companies, venture capital funds, and business development corporations are often used interchangeably.

Fortunately for the average investor, there are over a couple dozen ways to invest in these opportunities, according to the WallStreetNewsNetwork.com recently updated list of publicly traded Business Development Corporations and Private Equity Companies, most of which pay high yields in excess of 6%.

One of the highest yielding BDCs is TICC Capital (TICC), which has been paying dividends quarterly since 2004, and pays an extremely high yield of 11.6%. The stock has a price to earnings ratio of 7.6 and a forward PE of 9. Revenues for the latest quarter were up 19.4% year over year, but unfortunately, earnings were down 84.3%. This BDC funds secured and unsecured senior debt, subordinated and junior subordinated debt, and preferred and common stock of both private and public companies, specializing in technology, media, telecom, and medical equipment.

The company has invested in such companies as NetQuote, Inc., the web-based portal for insurance companies and consumers, StayOnline, Inc. a provider of wireless high-speed Internet access solutions for the lodging industry, and Ai Squared, a manufacturer of assistive technology software which makes the screen magnification program ZoomText.

BlackRock Kelso Capital Corporation (BKCC), a private equity firm founded in 2005, specializes in investing in middle market companies with EBITDA or operating cash flow between $10 million and $50 million. The firm has invested in various businesses including American SportWorks, Fitness Together, Grocery Outlet, Heartland Automotive Services, InterMedia Outdoors, Pre-Paid Legal Services, Renaissance Learning, and Sentry Security Systems. The stock trades at 12.4 times trailing earnings and 10.4 times forward earnings. The company pays a very high yield of 10.9%. Dividends are payable quarterly.

If you like monthly dividends, Gladstone Capital (GLAD) offers a very decent yield of 9.4%. Obviously, with these higher yields, you have higher risks. In addition, when interest rates rise, high yield BDCs can suffer significant drops.

If you are looking for potential high dividend investments, a list of over 25 high yield business development companies and private equity companies, which can be downloaded, sorted, and updated, is available from WallStreetNewsNetwork.com. A few of these companies pay dividends monthly and over a dozen have yields greater than 7%.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Private Equity Companies Yield More than 5%

Private equity is usually limited to the very wealthy and large institutions. Fortunately, the average investor can also get in on the action since there are many publicly traded private equity firms. The private equity companies provide working capital to smaller companies that are not publicly traded, in the hopes of improving revenues and earnings with a goal of profiting through bringing the companies public through an Initial Public Offering, also known as an IPO, or just reselling the companies to larger firms. Private equity companies also often provide loans to these companies.

Private equity companies, venture capital funds, and business development corporations are generally considered part of the same investment category, primarily due to the fact that these investment vehicles allow investors to get in on the ground floor of private companies before they go public. Once the companies in the portfolios have an IPO, the returns can be substantial.

A Business Development Corporation, also known as a Business Development Company or BDC, is similar to a publicly traded private equity fund. Many private equity companies are registered as BDCs for tax advantages, generally paying no corporate income tax because at least 90 percent of their income, profits, and capital gains are paid out as taxable dividends to investors.

If you are wondering how you cn invest in these, WallStreetNewsNetwork.com recently updated its list of over 25 publicly traded Business Development Corporations and Private Equity Companies, most of which pay high yields, with yields ranging from 3.4% to in excess of 10%.

One example is TICC Capital (TICC), a BDC that has been paying dividends quarterly since 2004, and yields 11.0%. Last Fall, the company boosted its dividend payout rate by 7.4%. The stock has a price to earnings ratio of 6.2 and a forward PE of 8.6. Revenues for the latest quarter were up 40.6%. The company invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, and common stock of both private and public companies, specializing in technology, media, telecommunications, and medical equipment. The company has invested in NetQuote, Inc., the web-based portal for insurance companies and consumers, StayOnline, Inc. a provider of wireless high-speed Internet access solutions for the lodging industry, and Ai Squared, a manufacturer of assistive technology software which makes the screen magnification program ZoomText.

BlackRock Kelso Capital Corporation (BKCC) which a private equity firm founded in 2005 which specializes in investing in middle market companies with EBITDA or operating cash flow between $10 million and $50 million. The firm has invested in such companies as American SportWorks, Fitness Together, Grocery Outlet, Heartland Automotive Services, InterMedia Outdoors, Pre-Paid Legal Services, Renaissance Learning, and Sentry Security Systems. The stock trades at 12.1 times trailing earnings and 10.2 times forward earnings. It sports a yield of 9.8% and pays its dividends quarterly.

Ares Capital (ARCC) is a private equity company that trades at 11 times forward earnings and yields 9.4%, and THL Credit (TCRD) has a 10.8 forward price to earnings ratio and pays a yield of 8.8%.

A list of over 25 high yield business development companies and private equity firms, which can be downloaded, sorted, and updated, is available from WallStreetNewsNetwork.com. Several of these companies pay dividends monthly and more than a dozen have yields greater than 8%.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

What's Been Happening with the Boombotix Startup

We have been running a series of interviews and articles on startups, and one of them that we have been following is Boombotix, the maker of very portable very high quality speakers. Earlier this year, we did an interview with the founder of the company. Then during the summer, we provided the news about the infusion of funds Boombotix received from venture capitalists.

We thought we would check on this startup to see how it is doing. They are now featured on Kickstarter.com with their latest product, the Boombotix REX, a six-sided speaker that has wireless playback, dual drivers, a bass woofer, is rugged and water resistant. It even has a build-in microphone.

Kickstarter, in case you are not aware, is a web site that allows people to donate money to companies and individuals for various projects. The donations are not investments, but donors usually receive products in return for their contributions. It's a way for people to raise money and get free advertising. Goals are set, and the funds aren't released to the money raisers until the goal is achieved. The listings are generally for a month.

So how have they done? They reached their goal of $27,000 in only two days. It's only been five days and they are now over fifty grand in funds raised, far exceeding their goal, plus the listing still has more than a month to go.

More information can be found about Boombotix at the company's website, Boombotix.com.

Spotlight on a Startup: Nutricula

Interview with Bob Berger, co-founder of the online magazine Nutricula

In a continuation of our series on startups, we decided to interview Bob Berger co-founder of Nutricula Magazine. Nutricula: The Science of Longevity Journal is an online magazine that was founded from scratch two years ago, with no venture capital funding. This extremely successful online publication now receives 3.5 million page views a month from readers all over the world.

Let's start by having you describe your online magazine.

Nutricula Magazine was created two years ago. Nutricula is the science of longevity, living as long and as healthy as possible. The name comes from turritopsis nutricula, a jellyfish that has the ability to live forever. It starts out as a polyp, becomes a jellyfish, and eventually reverts to a new polyp colony. We actually have Nutricula as a registered trademark. The magazine is published monthly, and appears as a flip magazine; however, we have discovered that most people end up reading the articles on blogs.

How did you happen to come up with the idea for the magazine?

We have an organic health factory farm, and we were looking for ways to market it. We were considering creating a magazine for a long time. It is an online magazine, however, we did print 200 issues for the first month. We publish scientific views and commentary by qualified individuals, doctors, scientists, clinicians, nutritionists, even veterinarians, as we feature articles on pet health also, and are planning a pet magazine. We have now advanced to videos for the magazine, which we call rich media, which includes audio, video, and 3D technology. We're not just looking at the present, but at future health issues; the future of health, living, and longevity. We also want to be able to answer readers' individual questions, not just providing general articles.

Who do you consider your direct competitors?

Everyone is our competitor but because we have superior content and do not have 'pop-ups', annoyances and distractions like many sites do, many people prefer to visit and read information on our site over those sites that do not have our content and have those pop-up's and distractions.

How do you go about marketing your magazine?

We strive to create the best content as possible. We do that by getting writers from all over the United States and even all over the world. They mention their article on Facebook (FB) and Twitter, and to their friends and associates, then their friends and associates mention it on Facebook, Twitter, and so on. We choose our articles based on what people are looking for on the Internet.

If you had Googled "nutricula" a year ago, it would come up with results about the jellyfish for the first couple pages. Now if you Google it, Nutricula Magazine comes up as number two on the list. When people are looking for something organically, such as diabetes or breast cancer, Nutricula articles will come up very high in the search engine rankings.

Two years ago, we didn't have any ranking at all. Last year, according to Alexa, we were in the top 500,000 in the world and the top 200,000 in the United States. Now we are between 40,000 and 50,000 in the world and in the top 7,500 in the US. Having unique content helps. Also, we are careful about the ads we have; so no pop-ups as that can affect our rankings.

What is your current staffing level like? Do you have a lot of people working for you besides your authors?

No. It's just me and Dalmo Accorsini, the other co-founder of Nutricula. Just the two of us. But another way to look at it is we have a huge staff, which is made up of our authors around the world who are willing to contribute to our magazine.

Can you give us an idea of what the growth of your online magazine has been?

Obviously, we started out at zero two years ago. Now we get 3.5 million page views a month. Our goal for next year is to get 10 million views a month, and we expect to get a lot of that through Apple (AAPL) iPhones, iPads, and Kindles.

How did you get your original funding for the company? Any venture capital investments?

It is all self-funded. It is just the two of us that post the content and do the work. If we did have venture capital funding at the beginning, I'm not sure that we would have had the same quality that we have now.

How do you generate income for your magazine? Through advertising; however, we are very selective on who advertises with us. We did have to turn down a few companies. We don't want to compromise the quality of the magazine with an advertiser that may have issues.

What do you consider your biggest challenges relating to running your business?

Time. We've run a number of issues meeting a monthly deadline. The other issue is keeping up with demand for additional information. But the big thing is having the time to coordinate everything and putting everything together.

Can you let us in on any new magazines or other businesses on the horizon?

We are revamping our Petological Magazine, our pet magazine, since pets are a huge business. Our Nutricula Magazine is going to be more interactive with more rich media.

What is your long-term goal for the company?

We're seeing where it's going. The more the magazine is recognized, the better.

Any suggestions for someone that wants to start their own online magazine or other type of business?

Stay the course. When someone starts a business, and they don't see a lot of growth at first, they give up after a few months. They should find a field that's important to them.

Thank you for your time and insight.

Thank you for the opportunity to be interviewed.

Readers can view the magazine at NutriculaMagazine.com.

Dr. Bob Berger holds Doctorates in Nutritional Biochemistry, (University of Tennessee, Knoxville, Tn.), and in Bio-Pharmacology, (University of Pennsylvania, Philadelphia, Pa.), as well as a Master of Veterinary Science, (MVSc), and an MS in Nutrition and Human Physiology, (University of North Carolina, Chapel Hill, NC). He is the Editor-In-Chief and President of Nutricula Dr. Berger is also a Co-Founder of THFF and Nutricula.

No investment recommendation nor any investment promotion is expressed or implied by either Stockerblog.com, the interviewer, Nutricula, or the interviewee.

10% Yields on Business Development Corporations and Private Equity Funds

Private equity companies, venture capital funds, and business development corporations are usually grouped together in the same investment category. This is mainly due to the fact that these investment vehicles allow investors to get in on the ground floor of private companies before they go public. Once the companies in the portfolios have an IPO, the returns can be substantial.

Private equity firms invest in the equity and often the debt of private companies. Usually private equity investments are available for accredited investors only, but fortunately, there are several private equity funds which are publicly traded that anyone can buy.

A Business Development Corporation, also known as a Business Development Company or BDC, is similar to a publicly traded private equity fund. Many private equity companies are registered as BDCs for tax advantages, generally paying no corporate income tax because at least 90 percent of their income, profits, and capital gains are paid out as taxable dividends to investors.

If you are wondering how common these types of investments are, WallStreetNewsNetwork.com recently updated its list of the publicly traded Business Development Corporations and Private Equity Companies, which lists over 25 of them, most of which, income investors will be happy to hear, pay dividends. The yields range from 2.9% to in excess of 12%.

One example is BlackRock Kelso Capital Corporation (BKCC), a private equity firm founded in 2005 specializing in middle market companies, with EBITDA or operating cash flow between $10 million and $50 million. The firm invests in such companies as American SportWorks, Fitness Together, Grocery Outlet, Heartland Automotive Services, InterMedia Outdoors, Pre-Paid Legal Services, Renaissance Learning, and Sentry Security Systems. The stock trades at 11.8 times trailing earnings and 9.6 times forward earnings. It sports a yield of 10.6% and pays its dividends quarterly.

TICC Capital (TICC) is a BDC that has been paying dividends quarterly since 2004, and yields 11.1%. The stock has a price to earnings ratio of 14.3 and a forward PE of 8.7. The company invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, and common stock of both private and public companies, specializing in technology, media, telecommunications, and medical equipment. The company has invested in NetQuote, Inc., the web-based portal for insurance companies and consumers, StayOnline, Inc. a provider of wireless high-speed Internet access solutions for the lodging industry, and Ai Squared, a manufacturer of assistive technology software which makes the screen magnification program ZoomText.

PennantPark Investment (PNNT) is a business development company that yields 10.3%, and has been paying quarterly dividends since June of 2007. The company invests between $10 million and $50 million in each of its portfolio companies, holding mezzanine debt, senior secured loans, and equity investments. The stock trades at 9.2 times forward earnings. PennantPark invests in such companies as the hot tub and spa manufacturer Jacuzzi Brands Corp., Learning Care Group, Inc. which is owner of one of the largest early education and child care providers La Petite Academy, and VPSI, the world's largest vanpool service provider.

To see a list of over 25 high yield business development companies and private equity firms, which can be downloaded, sorted, and updated, you may want to obtain it at WallStreetNewsNetwork.com. Several of these companies pay dividends monthly and more than a dozen have yields above 8%.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Wave Theory for Alternative Investments

I love alternative investments. They can be much more exciting than stocks and bonds. Venture capital, private equity, hedge funds, commodities, and precious metals make up the investment arena of 'alternatives'.

Wave Theory For Alternative Investments: Riding The Wave with Hedge Funds, Commodities, and Venture Capital by Stephen Todd Walker is the most complete book on alternative investments I have ever read. It is filled with numerous tables, charts, and graphs to make for easy reading.

Chapter 3 is probably the most important as it covers the advantages and disadvantages of all types of alternatives, and even more important, the section called Top 25 Alternative Surfing Maneuvers.

Here's a bit of trivia from the book. Did you know that back in 1999, the CIA (yes the US government's Central Intelligence Agency) set up its own venture capital fund? The fund, called In-Q-Tel, has invested in over 100 companies. It even invested in the technology that is now known as Google Earth.

Chapter 9 is my favorite section of the book, called Venture Capital Investment Vehicles. It covers what to invest in, how to invest, and the top twenty questions you should be asking before committing your money.

One great feature of the book is that Walker provides plenty of suggested web sites and other books.

If you have ever been interested in investing in alternative investments, or have started to dig your foot in the alternative water, or even if you have already been investing for a while, you should read Wave Theory For Alternative Investments.

Venture Capital Investment with a 7.2% Yield

Private equity companies take large positions in private companies, and sometimes own the entire companies. Often, these companies are referred to as venture capital firms. Sometimes, the only way to invest in a 'hot' company is through a private equity company. As an example, many years ago, I invested in a company called the Nautilus Fund, which happened to own an equity position in some small privately owned technology company with the odd name of Apple (AAPL).

At the time, I was using an Apple II computer with the Visicalc spreadsheet program. I couldn't believe that calculations could be done so easily on a small machine and then printed out. I was working for an investment firm at the time and wanted to invest in this little Apple company, but unfortunately, it wasn't publicly traded. Fortunately, I read in a Forbes article that a publicly traded venture capital company called the Nautilus Fund, had an equity interest in Apple. So to make a long story short, I bought some Nautilus for myself and some relatives, Apple went public, and Apple shares were spun off to the Nautilus shareholders.

Of course, investing in private equity can be very risky, which is why most private private equity firms are private. The few publicly traded ones gives smaller investors an opportunity to participate in this potentially very lucrative investment arena. To cut down on risk, many investors seek out the ones that invest in debt of private companies in addition to equity, so that income can be generated for the shareholders.

An example is Gladstone Capital Corporation (GLAD), which is structured as a closed-end management investment company. The company diversifies its portfolio by investing in both equity and debt securities, and allocating funds towards both small and medium-sized private companies. Gladstone, which has paid monthly dividends for many years, generates a yield of 7.2%. The stock trades at 12.8 times forward earnings and sells for about 3.5% below book value.

Gladstone provides financing for a very diverse portfolio of companies across many industries, including Country Club Enterprises which is the sole distributor of Club Car and E-Z-Go golf carts in the northeast U.S., Legend Communications of Wyoming which is the largest radio operator in their region, Reliable Biopharmaceutical which is a manufacturer of high value advanced pharmaceutical and biochemical products for the generic injectable pharmaceutical industry, Cavert Wire which is the largest supplier of non-galvanized bailing wire in the country, Newhall Laboratories which markets La Bella™, Golden Sun™, and Rebound™ personal care products, B-Dry which is the oldest basement waterproofer in the U.S., Access Television Network which distributes infomercials and other paid programming through about 300 cable television systems, and Westlake Hardware which is the largest member of the ACE Hardware Corporation buying cooperative.

Gladstone's earning announcement will be held November 22.

If you like high yield stocks, such as REITs, utilities, and ETFs, check out the free downloadable lists at WallStreetNewsNetwork.com.

Disclosure: Author owns AAPL at the time the article is written.

By Stockerblog.com