Top Picks 2007: Adrian Day gains with GAIN

Posted Dec 21st 2006 2:30PM by Steven Halpern
Filed under: Newsletters, ETF Investing

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Gladstone Investment Corp. (NASDAQ: GAIN) is the top conservative investment idea from Adrian Day, editor of The Global Analyst. He explains, "An attractive vehicle for investors seeking above-average yield is the so-called Business Development Company.

"These are companies that lend money to small and middle-market companies, often receiving equity participation in addition to the interest on the loans. Because they do not pay tax at the corporate level, but pay out essentially all their net income to investors, yields tend to be high, and we've been successful with several previous recommendations, including Allied Capital and American Capital.

"One of the newest and most conservative is Gladstone Investment. Run by David Gladstone, who has had a multi-decade career in this industry, GAIN has been relatively cautious in investing its funds since going public in the middle of 2005. This is because of a sense that the market is overheated with either low returns or risky loans.

"But all of Gladstone's loans are current, with no delinquencies, and the company has plenty of cash available to use if opportunities arise. Thus, over time, as the money is put to work, the dividend should increase and in the meantime, investors collect 5.6% on a stock that's trading at barely Net Asset Value.

"For patient investors, this is one to buy and put away. Ignore the short-term stock price fluctuations, collect the dividend, and be happy in three to five years time."

To see Adrian's favorite speculation for 2007, click here.