American Capital LTD (ACAS)

[Tex]

Finding projections 2y out will be a trick; ACAS' business involves buying and selling portfolio companies, so knowing what businesses ACAS will own in 2y is not really even possible.

Berkshire Hathaway makes money buying companies, but its business model doesn't generally call for disposition: you know the company will be an insurance powerhouse and will own Dairy Queen, Orange Julius, etc. Reading BRK's balance sheet to learn the "value" of the company is no more easy, but its cash flow can be understood as coming from a relatively unchanging field of sources. ACAS' balance sheet is no more transparent, but since the businesses can change there's less freedom to make assumptions about the performance over time of an asset pool whose components change.

The reason to invest in ACAS, if any, is that its management has gained your confidence that it is doing better-than-market opportunity-spotting, and that its business model attracts you because you believe that the opportunity for "deals" is higher in the market for illiquid privately-held companies.

There's an old article that talks about this:
http://jadedconsumer.blogspot.com/2008/06/professional-stock-analyst-opinions.html

Note that having good management doesn't eliminate volatility:
http://jadedconsumer.blogspot.com/2009/03/malon-wilkus-big-margin-call.html

Take care,
--Tex.