Grenville Strategic Royalty (GRC.V)

You can think of this as a listed capital ventures fund. They invest in relatively small companies. Instead of owning one small cap company, they can have a stake in 23. They provide financing to companies that can’t get bank financing, and they take a royalty on the sales. Their payback on these investments is 4 years, and the return on the investments is about 25%. The venture capital business in Canada has been a graveyard for the last 25 years. The guys running this are very experienced and are deploying the money effectively. Have about $33 million invested with about $22 million and capacity. Thinks it will grow substantially this year. Dividend yield of about 5.5%. A great investment and it is early innings of a long-term story.

They take about a 2.5% royalty on average, from smaller companies. Instead of paying to be invested in a venture capital fund, you are being paid the dividend from this. This gives you exposure to 20 names at a time, but not paying the fees of a venture capital fund. A fairly lucrative business. Dividend yield of about 6%.

His third largest holding. They have just been able to start flowing money through to shareholders as a dividend, 6.67%. They keep harvesting cash and doing deals. They have in excess of 30 royalty deals. They stumbled once last year and there is hope they can get about half of their million dollars back. The market has written that off entirely. This is going to be a buy and hold for him.

Making smaller bets on companies. Came out with news that one of the streams they bought was zero (fraud). He prefers DIV-T.

Released Q4 results last Friday, which were stellar. About half their earnings are in the US, so they have the benefit of the US$. Declared a dividend for the 1^st time with about a 8.5% yield. A very interesting growth model going forward. Already have investments in about 20 positions and will double that this year. The average royalty stake they have is only about 2.5%. Thinks there are a lot of ripe opportunities to come in and provide some capital to the venture stage of a lot of these investments.

This has come onto his radar very recently. These companies buy royalties, not oil and gas or gold. You can do quite well with this if you pay the right price and get the right return. Management seems to be very experienced, which is important. They don’t have a lot of track record.