What Can You Learn?

At some company’s investor online sites, you can request updates when the company submits a required United States Securities and Exchange Commission report. One such report that I request comes from Gladstone Investment (Ticker: GAIN). Because I own a large portion of GAIN shares I want to know what is happening in the business. GAIN has a fair amount of risk, as it is a microcap diversified financial company.

Email alert I received from GAIN yesterday.

I don’t recommend you buy as many shares as I have (3,900) unless you are open to a more aggressive investing approach. However, the purpose of this post isn’t to sell you on the idea of investing in GAIN. It is how you can learn from SEC Form 4 updates. A Form 4 is a “STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP.” Form 4 must be filed with the SEC whenever there is a material change in the holdings of company insiders. It is mandatory and becomes public record upon filing. Unfortunately, Fidelity Investments doesn’t show the most current filings. I like to know when insiders are buying and selling.

I have noticed an interesting trend since March 13th. Insiders are buying when the share price dips to crazy lows. When this happens, it may indicate that the leaders in the company (and board members) have seen the share price drop to an irrational low. They buy large blocks of shares as a result, because they now view the shares as a bargain. It is possible that they are trying to entice buyers like me, but I doubt it. These are wise business managers with large holdings in GAIN.

Notice the high frequency of GAIN’s FORM 4 statements since March 13.

Here is the most recent Form 4 for GAIN. This report tells me that David Dullum, the President of GAIN, bought 2,500 shares for $6.80 per share. He holds 126,416 shares.

Notice the information in TABLE I

If an insider is selling, that isn’t necessarily a sign that something is wrong. Like most investors, and insider might sell because they want to rebalance their holdings. Having too many eggs in one basket is a foolhardy investment approach.

GAIN is a diversified Business Development Company (BDC) with investments in Consumer Products, Business Services and Distribution and in Manufacturing. You may recognize a couple of the brands, including Brunswick (bowling). Their businesses are located throughout the US.