Barclays Begins Small-Stock Special Situation Coverage

Barclays Capital (BARC), the securities unit of Barclays Plc, has started a “special opportunities” equity research team that will focus mainly on small and midsize companies in the U.S.

Kannan Venkateshwar, who was responsible for cross-asset strategy within Barclays’s equity-linked strategies area, will lead the group. He initiated coverage today on six companies. RR Donnelley & Sons Co. (RRD) is a “top pick” with an overweight rating, according to a report today. Apollo Investment Corp. (AINV), Fifth Street Finance Corp. (FSC), Gannett Co. and New York Times Co. (NYT) were given equal-weight ratings, while Ares Capital Corp. (ARCC) was rated underweight.

“We broaden our coverage to include predominantly small- and mid-cap companies that are often overlooked by institutional investors,” the New York-based analyst wrote in the report. “These companies are likely to be in industries undergoing secular shifts and often where equity typically represents a smaller part of enterprise value.”

The Barclays team will give ratings, price estimates and earnings per share forecasts on the companies they cover.

An overweight rating means the stock is projected to perform better than the unweighted expected total return of the industry group’s coverage universe over a 12-month period. Equal weight means the stock is expected to perform in line with that estimated industry return, while the underweight rating is given to stocks that may perform worse than the unweighted expected total return of its peers.

To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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