The 10 Worst Investment Companies of 2011

As we approach the end of a tumultuous 2011, it's time to look back at the biggest winners and losers of the year.

So in this series, that's exactly what we're doing, sector by sector. Today, let's take a look at the biggest losers among public investment companies -- whether you call them business development companies, private equity shops, or something else. The lines get murky in the financial space, but to get technical, these are the companies classified as "investors" as opposed to "investment advice" based on Primary SIC industry. I'll hit that industry in another article. First, the backstory, then the results.

The backstory
This year, we saw U.S. Treasuries get downgraded from AAA status while Congress played politics instead of fixing the budget; a domestic economy that has been recovering from its financial crisis in fits and starts; big trouble in Europe; and a Chinese economy that doesn't seem so bulletproof.

The effect on the financial industry as a whole has been tremendous and the investment company area as a whole certainly had a bad year.  

The 10 worst investment companies of 2011
For context, the S&P 500 has returned 2.4% after dividends this year. In other words, the market has been basically flat.

Company

2011 Dividend-Adjusted Return

Price-to-Tangible Book Value

AllianceBernstein Holding (NYSE: AB  ) (38.9%) 0.8
MCG Capital (Nasdaq: MCGC  ) (34.6%) 0.6
Apollo Investment Corporation (Nasdaq: AINV  ) (33.7%) 0.8
ASA Gold and Precious Metals Limited (24%) 0.8
Compass Diversified Holdings (NYSE: CODI  ) (21.7%) NM*
Capital Southwest Corporation (20.5%) 0.6
MVC Capital (17.5%) 0.7
BlackRock Kelso Capital (Nasdaq: BKCC  ) (17.3%) 0.8
TICC Capital (Nasdaq: TICC  ) (14.4%) 0.9
American Capital (Nasdaq: ACAS  ) (9%) 0.6

Source: S&P Capital IQ. *Compass has negative tangible book value so its price-to-tangible book value isn't meaningful.

Not surprisingly given the financial environment, 2011 hasn't been kind to these various investor-related companies. It's certainly a tricky area to invest in. Trust in management is a must. The market isn't very high on these companies. Notice that every single one of these 10 companies trades below its tangible book value (except Compass, which has negative tangible book value).

For advanced investors who have the time and patience to dig in, this could be an area in which to bargain-hunt. For folks looking for simpler opportunities in the financial space, let me leave you with a dividend-producing regional bank that has some of the best operational numbers I've ever seen. I wrote about it in our brand-new free report: "The Stocks Only the Smartest Investors Are Buying." I invite you to take a free copy. Just click here to find out the name of the bank I believe Buffett would be interested in if he could still invest in small banks.

Anand Chokkavelu doesn't own shares of any company mentioned. Motley Fool newsletter services have recommended buying shares of MVC Capital. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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