Alaris Royalty Corp (AD.TO)

A Top Pick (May 2/13. Up 4.5%.) Last six months have been a little choppy. Has been under attack by a number of Shorts that mis-analyzed the company completely. In the last 5 years, they have invested in a lot of good companies, and continue to build shareholder value. 90% of free cash flow that comes out of their investments goes back to shareholders so there is a nice stream of dividends that come out. A table pounding buy at these levels. Over 5% dividend yield.

This has been marking time. Has a fairly long cycle between when they source a deal and when it gets completed. It has been eerily quiet for the company in the last little while. Wouldn’t be surprised if there was some kind of deal announced. Typically when they do announce deals, not too long afterwards there is a stock issue to pay for the deal. Feels the dividend is fairly sustainable. Still has a tax issue with CRA, but doesn’t think it will be a substantial hit if it goes against them. If you are a longer-term investor, they have a great track record. They are right in the sweet spot with all the baby boomers retiring, and this is one way they can transition out of their business.

It is possible that this could rebound and he has been buying here. They have a portfolio of 10-12 companies that they invest in and they had trouble with 2 of them. One was a temporary issue. What they really need to re-ignite the growth is some more investments.

Recently has been selling off because of a dispute with CRA which they had to put have up. This will take a while to sort out, but he feels they will have enough cash flow to more than cover that. They own a host of diversified investments and invest in private companies, but do so in a very unique fashion. Tend to invest by issuing preferred shares in certain circumstances their cash flow keeps increasing. If they fail to meet certain benchmarks, they can become converted into equity. Tend to look at companies that have at least 10 year track records of solid management.

Stock vs. Stock: AD or MRE? Interesting business model and have done very, very well. A financial capital company. Hit a few bumps when investing company had some troubles. Royalty based so they have less upside, but less downside. Buy for the dividend.

A company that has been able to acquire cash flow generating businesses. They use their currency to make a lot of acquisitions and pay a nice dividend out over time. That outlook is still intact. Has had a pause, but long-term the outlook is positive.

Looks very weak right now. There are 3 things that come to the foreground. Back in December there was an 8.6% drop. Near the beginning of the year there was another 7.3% drop. And then another 6.3% drop just last week. The long-term moving averages have turned down. Doesn’t see enough volume and can see this falling apart and going back down to $23.

Fell with all the rest of the interest sensitives. Found support at an old resistance level of around $25. He tends not to buy stocks like this because he feels there is very little upside from price potential, but as long as it doesn’t break $25 and you are happy with the dividend, it might just sort of look sideways for a while and you just collect the dividend. If it breaks $25, you have to jump out because there will be another fairly large leg down.

(Market Call Minute) Had owned this, but it was a disappointment. Got stopped out of most of his positions, but got stuck in a little bit. He would be a Seller on strength.

A really good niche finance company. They help private companies finance. Have been doing this for 5-10 years very successfully. Got hit in the last 4 months because of an investment that went bad last fall. It represented only 3% of their portfolio and the stock should have dropped 3%-4%, but instead of that it dropped 30% because a lot of Short managers jumped on it with allegations about it being just the start of a whole series of write-offs.

The ultimate conglomerate. Buys private companies, arrange deals where they get a royalty off revenue or cash flow. The difficulty for him is to look through their underlying businesses. Had some issues with some of the companies they had bought. Has never been a fan of conglomerates.

Likes this very much. There are not many companies out there that the average investor can get involved with on private equity. This is one of them. It has had some real problems. The concept of what they do is really, really good. They spent a lot of time researching companies, finance them and get a revenue stream.

Chart is typical of interest sensitive stocks. You are now in a very major selloff. Before he would buy anything like this, he would like to see it consolidate and then break out. For the time being, the trend is down.

Has reassessment problem with the CRA been solved or is there another shoe to drop? Doesn’t think it has been resolved and doesn’t think there is another shoe to fall. Always found them a bit expensive. Has encountered a few bumps on the road lately and so it might be getting into Buy territory. He’ll know more next week after he meets with management.

Looked at this in the past because of the attractive dividend and the good growth trajectory, but it was too hard to get a handle on all the individual businesses they own and get royalties on and how they will perform and how to monitor them. The risk is one of their companies having a hiccup, which could cut into the uncertainty and fear of investors. To compound problems, they bought some tax shelters and CRA is on a bit of a witch-hunt so anybody who has acquired any tax shelters, they are trying to reassess and reclaim some of the lost revenues.