Trinity Capital: A Contrarian Pick Amid BDC Downturn

Trinity Capital is a top contrarian pick despite BDCs being down. The company offers a 14% yield, and its recent Q2 2025 earnings season performance suggests it is a strong investment opportunity. As a contrarian pick, Trinity Capital is an attractive option for investors looking to buy into a market that has been performing poorly.

Trinity Capital Inc. (NASDAQ: TRIN) has emerged as a top contrarian pick despite the broader Business Development Corporation (BDC) sector's downturn. The company offers a robust 14% yield and has demonstrated strong performance during its Q2 2025 earnings season, making it an attractive investment opportunity for those seeking to capitalize on underperforming markets.

The BDC sector has been facing challenges, with many funds reporting disappointing results and lower yields. However, Trinity Capital stands out due to its unique investment strategy and strong financial performance. The company's internally managed status allows it to maintain a lower fee structure compared to its peers, which can significantly impact its yield and overall profitability.

Trinity Capital's Q2 2025 financial results were particularly impressive. The company reported a 27.3% year-over-year (YoY) revenue growth and a net asset value (NAV) of $923.6 million. These figures underscore Trinity's ability to generate consistent returns through its focus on specialized financing and strategic asset-based lending [1]. Additionally, Trinity Capital's Return on Average Equity (ROAE) climbed to 15.9%, outperforming many peers in the alternative asset management sector [1].

One of the key factors contributing to Trinity's success is its strategic expansion into alternative assets. The company has committed up to $40 million in an asset-based revolving credit facility to Alt Platform Inc., a trading card marketplace. This move not only accelerates Alt's global expansion but also signals a broader shift in capital allocation towards emerging asset classes [1]. By monetizing trading cards as collateral, Trinity is addressing liquidity challenges and tapping into high-growth markets.

The company's recent credit facility expansion further highlights its growth trajectory. Trinity Capital increased total commitments under its credit facility to $690 million, up from $600 million. This $90 million expansion was made under the facility's existing accordion feature [3]. Additionally, Trinity Capital's upcoming $275 million Small Business Investment Company (SBIC) fund will provide further capital to growth-stage companies in alternative asset markets [4].

Despite the risks associated with collectibles as collateral, Trinity Capital's use of AI-driven valuation tools mitigates these risks. These tools provide standardized, data-backed appraisals, reflecting the broader shift towards digitization and transparency in the alternative asset management sector [1].

For investors, Trinity Capital offers a compelling case study in strategic financial positioning. Its ability to combine high-growth sectors with robust credit structures positions it to outperform in a market where traditional assets are underperforming. The company's internally managed status and strong financial performance make it an attractive option for those seeking to buy into a market that has been performing poorly [2].

In conclusion, Trinity Capital Inc. is a top contrarian pick despite the broader BDC sector's downturn. The company's strong financial performance, strategic expansion into alternative assets, and robust yield make it an attractive investment opportunity for those seeking to capitalize on underperforming markets.

References:
[1] Trinity Capital Inc. Provides Alt Platform Inc. with up to $40 Million in an Asset-Based Credit Facility [https://stocknews.ai/ai-news/trinity-capital-inc-provides-alt-platform-inc-with-up-to-40-million-asset-based-credit-facility/687a46b5194567150ae1a5cf]
[2] Trinity Capital Inc. Reports Second Quarter 2025 Financial Results [https://www.prnewswire.com/news-releases/trinity-capital-inc-reports-second-quarter-2025-financial-results-302522319.html]
[3] Trinity Capital (NASDAQ:TRIN) has increased total commitments under its credit facility to $690M, up from $600M. The $90M expansion was made under the facility’s existing accordion feature. Source: Press release More on Trinity Capital Trinity Capital: The 12.9% Dividend Yield Remains One Of The Best In The BDC Space Buy Trinity Capital's TRINI, Sell WhiteHorse Finance's WHFCL Trinity Capital Inc. 2025 Q2 - Results - Earnings Call Presentation Trinity Capital originates $519 million of new commitments in Q2
[4] Khosrork/iStock via Getty Images Not that long (before Q2, 2025 earnings season), I issued an article on Trinity Capital Inc. (NASDAQ:TRIN) titled: Trinity Capital: 14% Yield To Buy Now. I labeled TRIN as one of the best buys in the BDC sector even though it is biased towards venture capital firms, which is where risks are theoretically higher. My closest followers have probably noticed that while I am bullish on some specific BDCs, when it comes to VC-focused ones then in 99% of cases my stance is skewed towards the bearish end. For example, such players as Hercules Capital, Inc. (HTGC), TriplePoint Venture Growth (NYSE:TPVG) and Horizon Technology Finance (NASDAQ:HRZN) seem simply too risky (or overvalued relative to the underlying risks) for my taste. In my view, the case has to be extremely strong and convincing for investors to assume VC-related risks on top of what already comes with baseline BDC exposures (e.g., lending to leveraged non-public enterprises, charging aggressive all-in-yields etc.). However, TRIN is really a different animal. Since the publication of my previous piece, it has outperformed both its VC peers and the overall BDC market (BIZD). Ycharts This kind of outperformance might actually imply that the remaining incremental return potential is largely exhausted. The P/NAV metric for TRIN stands at 1.22x, which is also an indicate of material premium over the sector average of 0.96x. However, I have a different view. Based on Q2, 2025 financials and considering the BDC sector-wide backdrop, the thesis for going long TRIN has strengthened even further. Let me explain this. Thesis review Before I dive into the Q2 details, let's level set the P/NAV element. Yes, it is true that TRIN trades at ~22% premium, which signals a disconnect from the sector average. Yet, it is critical to understand that a significant driver behind this multiple is the fact that TRIN is internally managed BDC (i.e., the management is not outsourced, hence the fee component is not as notable headwind as it is for ~90% of the players). The other 4 internally managed BDCs and their P/NAV metrics are as follows: Main Street Capital (NYSE:MAIN) - P/NAV of 2.04x. HTGC - P/NAV of 1.64x Capital Southwest