Fifth Street Finance Shares Plunged: What You Need to Know (FSC.DL)

Fifth Street Finance Shares Plunged: What You Need to Know

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Do you love roller coasters? Then you're going to love Fifth Street Finance (NYSE: FSC ) . This business development company dropped 16% in early trading this morning, perhaps prompted by doubtful words from the Oracle of Not-Omaha, Jim Cramer.

So what: Last night on Mad Money, Cramer worried aloud over Fifth Street's ability to finance its monster 11% dividend yield. This morning, the worry turned contagious. Granted, after the plunge investors came to their senses and began buying the stock again, reducing Fifth Street's loss to just 2% at last count -- but not before a whole lot of damage was done to investor portfolios.

Now what: Was the damage deserved? I'm not so sure it was. If it's the company's dividend payout ratio of 188% that worries Cramer, well, Fifth Street could easily cut that payout in half, and still pay out a 5.7% divvy. Tack that onto the company's 7.6% growth rate and P/E of 15.6, and you're pretty close to a fair price on this stock.

Long story short, I'm not personally going to run out and buy Fifth Street at today's prices. But I'm not convinced it's a great short idea either.

Want a graduate level course in Fifth Street Finance? Add it to your Fool Watchlist.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

Fool contributor Rich Smith does not own (or short) shares of any company named above. The Motley Fool has a disclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment icon found on every comment.