Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

GAIN: $12 Buck Chuck

|About: Gladstone Investment (GAIN), Includes: AGNC, LTC

GAIN has been bottoming out at $9 and topping at $12 for years.

I have been capitalized on this cycle twice.

You should follow this stock and if it enters the $9 realm again, it is a great buy!

GAIN: $12 buck chuck

Buy at $9, Sell at $12 - Rinse, Wash, Repeat

I don’t set too many rules when investing. I believe that a good deal is more important than a good metric. However, I do stick to a few rules when purchasing dividend income:

  1. I only buy yields greater than or equal to 7%

  2. No more than 20% of my dividend portfolio in one stock

  3. I set target sell prices and I sell at those prices no matter what

Rule #1 is easy to follow, but #2 and #3 can be tricky. This is because if your stock appreciates too much, it can appreciate you out of rule #2. However, you can use #3 to keep #2 in check by setting a sell price and sticking to it.

For GAIN, I set a sell price at $12.00. When I started buying it around $9 in early 2017, I thought it was a great deal. It was yielding 8.53% and paying it monthly. Additionally, they threw in a “special” dividend now and then, increasing the yield even more. Also, they had been paying a monthly dividend since 2005. High yields can be scary, but if you pair that with a special dividend and a track record of consistent dividends and increases, that is a good indicator that these guys and gals know how to succeed.

But why $12? Well, it represents a 33% increase. The stock market averages 8%, so anything over 15%, I feel, is a safe sell. The reason I hold onto my dividend stocks past 15% is because when you sell off shares, you lose the income. I am specifically buying these for income, so that is why I will usually hold onto these for longer than usual.

According to my brokerage account, I first purchased GAIN on a warm spring day in April of 2017. On the 3rd, I purchased at least 521 shares for $9.06 each. On the 5th of April, I purchased at least an additional 308 shares for $9.00 each.

I sold these on August 16, 2018 for $12.01. Here is what has happened since:

GAIN basically peaked around $12 when I sold, then fell below $9, and then hit $12 again in seven months. I had DRIPed those monthly payments and capitalized on some amazing DCA purchases. I have no rule on how long to wait, but I decided enough time had passed and I would stick to my $12 rule. Additionally, using FIFO, I was still selling shares bought at $9.00 in 2017. This is important because long-term gains are taxed at a lower rate than short term.

On February 9th, 2019 - I decided I would sell off 635 shares of GAIN at $12. It was hovering around $11.80 at the time. This move would get me back in check with rule #2 and #1 since I DRIP my dividends and the yield fell below 7%. On February 11th, 2019, my brokerage account automatically sold my shares at $12.00 that were purchased on 4/11/2017 for $9.00. The next day, I reinvested 2/3 of that into AGNC and 1/3 into LTC. I lost $43.18 per month from selling GAIN, but purchased $61.37 per month by reinvesting it.

Disclosure: I am/we are long LTC, GAIN, AGNC.