Gladstone Investment's Sell-Off Creates 'Attractive Entry Point,' Wedbush Says

Shares of Gladstone Investment Corporation (NASDAQ: GAIN) are lower by more than 11 percent over the past three months, a move investors should take advantage of, according to Wedbush.

The Analyst

Wedbush' Henry Coffey upgraded Gladstone Investment's stock from Neutral to Outperform with an unchanged $11 price target.

The Thesis

Gladstone Investment, a closed-end, non-diversified management investment company, boasts a favorable business model that makes it an attractive investment after a more than 10 percent decline, Coffey said in a note. The company essentially buys companies and in most cases its investment is divided between a higher yielding debt (80 percent of the investment) and a direct equity investment (20 percent).

Over the past year, the fair value to cost mark on the company's investment portfolio rose from 94.5 percent to 99.2 percent, the analyst said. During the most recent reported quarter the benefit of this was seen in several fronts, including a gain in net interest income and a credit to bad debt expense.

Gladstone Investment's monthly dividend payout rate of around 6 cents is safe and the 6-cent special dividend is likely to grow and be paid twice a year, Coffey wrote. As it stands the company's annual dividend including ordinary and special stands at 90 cents per year and over the next two years this should grow to 95 cents. As such, investors can expect a total return of 22 percent through dividends and gains in share value.

Price Action

Shares of Gladstone Investment were trading higher by more than 4.9 percent Tuesday at $10.03.

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