Is ARCC a buy, hold, or sell?
ARCC carries a valuation grade of Hold. At a trailing P/E of 11.7, the stock trades at a 17% discount to the Financials sector median of 14.0x. Our discounted cash flow model produces an intrinsic range of $24–$35 — implying a +53% margin of safety at the current price of $19.04. The width of the DCF range reflects genuine uncertainty in the terminal growth rate assumption: the correct framework is a probability-weighted distribution over scenarios, not a single point estimate. See the DCF valuation framework for full methodology.
With a 3% beat rate on recent quarters, earnings predictability has been mixed. The most recent quarter missed by a 2.5% earnings surprise. Analyst estimate revisions are trending upward.
What are ARCC's key risk factors?
With a beta of 0.62, ARCC exhibits a defensive risk profile relative to the broad market. The 95th-percentile CVaR of -10.6% on a one-month horizon should inform position sizing directly: at a 10% portfolio weight, this tail event contributes approximately 1.1% of total portfolio loss in the worst 5% of months. Net margins of 37.3% are significantly above the Financials sector average of 28%, reflecting durable pricing power. Leverage is moderate with debt-to-equity at 113%.
At 0.00, the put/call ratio skews bullish, with call buyers dominating recent flow. Implied volatility of 0.4% is below realized volatility of 12.6%, potentially making options relatively cheap. Insider transactions show net buying of $2.3M over the trailing period, a signal often associated with management confidence. Short interest stands at 5.7% of float, a moderate level.
How does ARCC fit in a diversified portfolio?
At typical HENRY portfolio weights — 10–20% of the equity allocation — ARCC carries a beta of 0.62, meaning it amplifies broad market moves proportionally. The appropriate weight is not a function of conviction alone, but of the full covariance structure across all holdings. See the Ledoit-Wolf covariance framework for the methodology behind these calculations.
Among closely correlated names, ARCC shows the strongest co-movement with OBDC (0.82), BXSL (0.79), MAIN (0.70). Investors seeking diversification should note these correlation dynamics when constructing multi-asset portfolios. With the top peer correlation at 0.82, adding ARCC to a portfolio that already holds these names provides limited marginal diversification benefit — particularly during stress events when correlations converge toward 1.0.
True portfolio risk is a function of the full covariance structure across all holdings — not individual stock metrics. The Portfolio Health Check quantifies this at the portfolio level: it surfaces hidden concentration, marginal CVaR contributions, and the degree to which your overall allocation deviates from an optimal risk-adjusted mandate. The ARCC analysis here is a single node in that larger structure.
For the portfolio construction framework underpinning ARCC’s position sizing and conviction rating — including IPS guardrails, Black-Litterman allocation, and CVaR constraints — see: Investment Policy Statement Framework →
