Insider Trading Report: Capital Southwest Corp (CSWC)

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  • David Brooks, a director at Capital Southwest Corp (CSWC), recently added 1,500 shares. The buy increased his holdings by just over 5 percent, and came to a total cost of just under $31,000.

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  • This marks the first insider buy in nearly a year, when the company CEO and CFO each picked up more than 20,000 shares near the market low. Overall, insiders have been buyers over the past three years, with no insider sales since that time.

    Overall, insiders own 7.7 percent of the company.

    Capital Southwest is structured as a business development company. It invests in credit and private equity deals across a variety of middle market companies. As a BDC, the company is required to pay out 90 percent of its earnings in the form of a distribution. Typically, a BDC invests in companies that aren’t publicly-traded.

    Action to take: Trading at 11 times forward earnings and not overly leveraged for a financing company, shares look attractive here. At current payouts, shares yield 8.2 percent, making for an attractive play for investors.

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  • Shares have been in a strong uptrend, but the pace of the uptrend is likely to slow. But, traders can buy the slightly in-the-money June $20 calls for about $1.50, and leverage any potential uptrend in shares from here.