Insiders keep banking on Main Street
Traders have increased their personal holdings in a strong business financing company.
By Mark Skousen, Forecasts & Strategies
Our favorite speculation is Houston business development company Main Street Capital Corp. (MAIN).
And insiders keep buying the shares. Nine members of Main Street's management team and directors bought additional shares in April and May, including CEO Vincent Foster and president Todd Reppert. Both are the largest shareholders in the company.
The company makes equity investments and lends money to small- and midsized companies. Typically, these businesses are cash-flow positive, with revenue between $10 million and $100 million.
Main Street is well diversified. Of the 74 companies in its portfolio, the largest sectors are commercial services and suppliers, which comprise 12% of its holdings. Energy and media each make up 9% of Main Street's portfolio.
Geographically, 43% of its companies are located in Texas, Oklahoma, Arkansas, Louisiana, New Mexico and Arizona. Another 29% of the companies are in the West, including California.
Total investment income rose an outstanding 54% to $20.6 million from the previous year, and net asset value (NAV) rose from $15.19 to $15.72 in the first quarter. Operating margins are a whopping 80%. And management is earning a healthy 18% return on equity.
Main Street also announced that it was raising its monthly dividend to 14.5 cents per share, starting in July. The business development company offers a rising dividend policy after recovering from the 2008 financial crisis.
Despite all of its solid fundamentals, the stock price continues to be volatile, so investors should take advantage of sell-offs to buy more shares.
Motley Fool recently identified Main Street as a top stock because it fit all of the following seven criteria: double-digit rising sales, rising free cash flow and book value, improving margins, rising return on equity, insider buying, regular dividends, and no history of being a "hot" stock or media darling.
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After enjoying a smooth rise in stock prices since May, investors are about to be hit with another bout of volatility.
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