Should Investors Buy Turning Point Brands as Prospect Capital Doubles Down on the Stock?

TPB -0.34% PSEC +0.95%

Key Points

• Prospect Capital added 59,250 shares of Turning Point Brands, worth an estimated $6.65 million increase in position value.

• The transaction represents 2.1% of fund’s 13F reportable assets under management.

• The firm's post-trade stake: 93,600 shares valued at $9.25 million as of September 30, 2025,

• Turning Point Brands comprises 4.8% of fund AUM as of September 30, 2025, making it the fund’s 7th-largest holding.

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On Nov. 14, 2025, Prospect Capital Advisors, LLC disclosed a third-quarter purchase of 59,250 Turning Point Brands shares, increasing its position by an estimated $6.65 million.

What happened

According to a Securities and Exchange Commission (SEC) filing dated Nov. 14, 2025, Prospect Capital Advisors, LLC bought 59,250 additional shares of Turning Point Brands (NYSE:TPB) during the third quarter.

The increased stake was valued at $9.25 million at quarter-end, and represented 4.8% of the fund’s reportable assets under management.

What else to know

Prospect Capital's top holdings after the filing:

• PJT Partners Inc (NYSE:PJT): $17.1 million (8.8% of AUM)

• Grand Canyon Education Inc (NASDAQ:LOPE): $15.4 million (8% of AUM)

• OSI Systems Inc. (NASDAQ:OSIS): $13.1 million (6.8% of AUM)

• Rush Street Interactive Inc (NYSE:RSI): $12.2 million (6.3% of AUM)

• InterDigital, Inc. (NASDAQ:IDCC): $10.2 million (5.3% of AUM)

As of Dec. 1, 2025, shares were priced at $97.61, up 58% over the past year, outperforming the S&P 500 by 45 percentage points.

Company overview

Metric

Value

Price (as of market close Dec. 1, 2025)

$97.61

Market capitalization

$1.86 billion

Revenue (TTM)

$435.72 million

Net income (TTM)

$52.37 million

Company snapshot

• Turning Point Brands offers a range of branded consumer products, including rolling papers, cigars, moist snuff, chewing tobacco, and vapor products, under the brands Zig-Zag and Stoker's.

• The company generates revenue by manufacturing, marketing, and distributing tobacco and alternative products through wholesale distributors and retail channels.

• Primary customers include wholesale distributors, convenience stores, tobacco outlets, food stores, and mass merchandisers across the United States.

Turning Point Brands is a leading consumer products company focused on tobacco and alternative smoking products, with a diversified portfolio of well-established brands.

The company leverages a multi-segment strategy, targeting both traditional tobacco consumers and those seeking alternative products.

Its distribution network and brand recognition provide a competitive edge in the consumer defensive sector.

Foolish take

In my opinion, Prospect Capital's purchase of Turning Point Brands is noteworthy to investors since they are doubling down on a stock that is rocketing higher.

Prospect's initial purchase was around $76 per share, but the firm nearly tripled its position in the company at $99 per share.

Growing sales and adjusted net income by 31% and 18% in its latest quarter, Turning Point Brands may be worthy of this bullish sentiment.

Holding a No. 1 market share in rolling papers and cigar wraps with its Zig Zag brand and the top spot in loose-leaf chew, Turning Point Brands is capitalizing on its leadership positioning and expanding its product suite.

Now diving into the modern oral nicotine industry -- which has seen its can volume grow by 58% annually since 2020 -- TPB's FRE and ALP brands could become the stock's next growth area.

That said, TPB trades at 34 times earnings, so it needs to see some steady growth from its new growth areas to support this valuation.

Due to the company's area of focus, it certainly qualifies as a battleground stock. Still, I can definitely see why Prospect Capital appears bullish on the company, especially considering its recent growth rates.

Glossary

Assets Under Management (AUM): The total market value of all investments managed by a fund or investment firm.

13F Reportable Assets: Securities that institutional investment managers must disclose quarterly to the Securities and Exchange Commission (SEC) on Form 13F.

Quarter-over-quarter: A comparison of financial or operational results from one fiscal quarter to the next.

Stake: The amount of ownership or investment a fund or individual holds in a company.

Position: The quantity of a particular security or investment held by an investor or fund.

Outperforming: Achieving higher returns than a benchmark index or comparable investment.

Consumer Defensive Sector: Industry segment focused on products with steady demand, like food, beverages, and tobacco.

Distribution Network: The system a company uses to deliver products from manufacturing to end customers.

Multi-segment Strategy: A business approach targeting multiple customer groups or product categories within a market.

Wholesale Distributors: Companies that buy products in bulk from manufacturers to sell to retailers or other businesses.

Branded Consumer Products: Goods sold under a recognized brand name, often associated with quality or reputation.

TTM: The 12 months ending with the most recent quarterly report.

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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Grand Canyon Education and PJT Partners. The Motley Fool recommends Turning Point Brands. The Motley Fool has a disclosure policy.

Should Investors Buy Turning Point Brands as Prospect Capital Doubles Down on the Stock? was originally published by The Motley Fool