said it lowered its rating on the shares of American Capital Strategies, Ltd., a publicly traded buy out and investment firm that owns Confluence Watersports and dozens of other companies.

Zacks said it downgraded ACAS to a “Hold” from a “Buy” after the company's core first-quarter operating results fell three cents shy of expectations.


“FY08 and FY09 are proving to be somewhat difficult years for this company and we have lowered our EPS expectations accordingly,” wrote Eric Rothman.

Rothman said that while ACAS has increased its earnings and dividends since going public in 1997, market volatility caused by deteriorating conditions in the credit markets could undermine ACAS' diividend yield.

“We expect to see the earnings and dividend growth to continue through 2008,” wrote Rothmann. “But mergers & acquisitions (M&A) volumes declined in 1Q08. Also, the deterioration in the credit markets created general market volatility, and illiquidity has resulted in significant declines in the market values of debt and equity investments.” lowered its earnings expectations for ACAS for FY08 and FY09 to $3.02 per share and $3.25 per share, respectively, from $3.55 per share and $3.65 per share.

Shares of ACAS are now trading at 1.12x its current net asset value (NAV) of $28.16 per share. That is below its 10-year range of for the past several quarters, but is in-line with multiples of its peer group.