Insider Buying at Gladstone Investment Corporation (GAIN)

According to SEC filings, the CEO of Gladstone Investment Corporation (NASDAQ:GAIN), David Gladstone, added to his position on June 15, buying 158,500 shares for a total cost of $1.25 million. Gladstone’s purchase gives him 526,973 shares total. Several hedge funds also added to their holdings in the first quarter. John Overdeck and David Siegel’s Two Sigma Advisors increased its position by 66% to 171,421 shares while D.E. Shaw increased its position by 248% to 84,784 shares. Joining them as large shareholders were Millennium Management with 76,866 shares, and Citadel Investment Group with 64,482 shares.

Gladstone Investment Corporation GAIN  logo

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Gladstone Investment Corporation (NASDAQ:GAIN) is a closed-ended business development company that makes equity and debt investments in established private businesses based in the United States, with the general goal of allocating 80% of its capital to debt securities and 20% of capital to equity securities. Because the U.S. economy has recovered, Gladstone has had a good three years. The size of Gladstone’s investment portfolio has increased form $226 million in March 2012 to $466 million in March 2015, while shares outstanding have increased by only 37% during that span. Because Gladstone’s portfolio size has increased, Gladstone’s income per common share has increased from $0.62 in 2012 to $0.75 in 2015, while its distribution per common share has increased from $0.61 in 2012 to $0.77 in 2015.

Powering Gladstone’s income growth is a recovering economy. The U.S. unemployment rate is now 5.5%, 2.7% below the unemployment rate in March 2012. With their jobs secure, consumers are spending more. The extra consumer spending is increasing the top and bottom lines of Gladstone’s portfolio companies and increasing Gladstone’s portfolio companies’ asset values. As the economy gathers strength, Gladstone’s net asset value (NAV) will continue to increase.

Also helping Gladstone is rising yields, which help Gladstone earn more from its variable debt investments. As of March 31, 2015, 79.9% of Gladstone’s debt portfolio securities are variable interest rate securities with a Libor Floor.

David Gladstone likely bought shares of Gladstone Investment Corporation (NASDAQ:GAIN) because the stock trades at a discount to the NAV. At its current price of $7.72 per share, Gain Investment Corporation trades at a 16% discount to its March 31 NAV of $9.18 per share. The discount to NAV adds a margin of safety to the stock. Another attractive property of Gladstone Investment Corporation is the monthly dividend of $0.0625, which gives the stock a dividend yield of 9.64%. Given the healthy economy and rising yields, Gladstone Investment Corporation’s dividend will likely continue to increase, making the stock that much more attractive to both insiders and outside investors alike.

Disclosure: None