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TMFDeej (99.47)

Global Portfolio Candidate #1

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January 14, 2013 – Comments (4)

Yesterday I talked a little bit about how I am planning on expanding my portfolio to include stocks listed on non-US exchanges.  The trick of course is to find stocks that are obscure enough or misunderstood nough to be cheap, but...still have enough information out there on them that a foreigner like myself can intelligently decide whether to buy them and keep tabs on them oing forward.

So I've been looking around at Canadian stocks first.  Here's the first one that I found that looks somewhat interesting.   The company is called Alaris Royalty Corp. It trades on under the symbol AD in Toronto and ALARF OTC here in the U.S. From what I have been able to gather thus far, this looks sort of like a Canadian BDC-esque company that provides loans to smaller businesses. It pays a monthly dividend of around 5% (annually).

The companies that Alaris are invested in seem fairly interesting and diversified, including doctors, flooring, and many more.

Here's a link to a recent presentation that the company made:

http://www.alarisroyalty.com/files/Alaris%20Investor%20Presentation_January%202013_v001_b0n9oo.pdf

I am very, very leery of BDCs in general. I love the comcept of them, but for some reason they seem to be rife with fraud. This particular company sort of reminded me of Special Ops' own Sprott Resources in some ways so I figured that I'd take a closer look at it.

Looking at its metrics, the company certainly does not appear cheap by any stretch of the imagination. Having said that, it has done an outstanding job at generating value for shareholders. Check out this chart of the stock's performance since it went public on the Toronto exchange in late 2009, keeping in mind that it has been paying a substantial monthly dividend along the way:

http://finance.yahoo.com/q/bc?s=AD.TO&t=5y&l=on&z=l&q=l&c=

This sort of firm almost strikes me as sort if a jockey play. In order to justify investing in it, particularly when it's trading at twice book value, one has to have confidence that management can consistently replicate these results going forward.

Here's the bio of the Company's CEO, Steve "Don't call me Stephen" King. Take a look at it and tell me if you notice anything interesting:

"Prior to joining the Alaris Royalty Corp. in July 2008, Mr. King was and continues to be the President and Chief Executive Officer of Alaris IGF Corp. and its predecessor since April 2004 when he co-founded Alaris. Steve spent 12 years in the investment banking industry, most recently as director of investment banking for First Associates Investments Inc., a predecessor of Blackmont Capital Inc. He has also held similar positions with Research Capital Corporation and Sprott Securities Inc. Mr. King is a director of Metropolitan Investment Corporation, a private investment company and a director of the general partner of LifeMark Health. Steve manages the investment process every step of the way and uses his creative financial mind to structure deals that benefit all parties involved. Steve is a married father of three children and an avid sports fan, player and coach."

Ah Ha! I knew that this company reminded me a little of Sprott. That may be why, not just the fact that they're both Canadian. Very interesting.

I did notice in Alaris' press releases that the Company may be raising money by issuing new shares at $22 Canadian in the near future. It recently closed on the Toronto Exchange at over $25. If this offering were to cause the stock to drop, it might provide a better entry point.

On a funny side note, Mr. King's signature may be worse than the signature of the potential new Secretary of the Treasury. You can see it at the bottom of his recent letter to shareholders:

http://www.alarisroyalty.com/About-Us/Presidents-Message/default.aspx

Are there any Canadians, or non for that matter, out there who are familiar with Alaris.  As I said, the stock doesn't exactly look cheap enough to me at this point, but they have don an outstanding job for shareholders thus far as a public company.

Thanks for reading everyone.  Have a great evening.

Deej 

4 Comments – Post Your Own

#1) On January 14, 2013 at 11:43 PM, Option1307 (30.54) wrote:

This doesn't seem very " typical deej" like stock. As you say, it's not cheap and there are not any catalysts or special situations to unlock shareholder value.
I haven't looked into this company at all and it may be worthy of an investment. Just be careful you don't drift away too far from your staple stock picking method. It seems to have been working lately so don't go changing it!
Just a friendly reminder, I know I have got caught in the past changing my style too much

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#2) On January 15, 2013 at 11:45 AM, MegaShort (99.95) wrote:

Deej, in Canada you might want to check out Petrobank/Petrobakken/Petrominerales to see if there's any hidden value in their spinoffs. The last I heard Petrobank was trading well below sum of parts.

I've also seen Pulse Seismic and Canyon Services mentioned by value investors.

A tiny private equity company I'm interested in is Counsel RB Capital. They're listed in the US but their parent is listed in Canada. (CRBN, CXS.TO)

Other than energy and mining, not too many investment opportunities in Canada as far as I can tell.

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#3) On January 15, 2013 at 8:15 PM, TMFDeej (99.47) wrote:

I know what you're saying, Option.  I've done a good job at sticking to my knitting lately.  And the stocks have been doing very well, too.   

While Alaris certainly is not cheap enough, I would consider a jockey play a type of special situation to a certain degree.  Though this would have been more of a jockey play when it first started a couple of years ago.  Now it's a lot longer in the tooth.  The key with jockey plays is to get in either on the ground floor or while they are cheap.  This is neither.  I still find it interesting though. 

I think that ultimately I am going to pass on this one because Sprott Resourse is so much cheaper that I might as well invest with the best rather than go with a more expensive derivative.  Expanding the universe of potential stocks should increase the quality of idas, not suck me into marginal ones :). 

Thanks for the names Mega.  Where have you seen these stocks mentioned?  Are there any good blogs out there by Canadian investors.  I'd like to bookmark a few.  You're right, there's a ton of mining and energy plays there. 

Deej 

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#4) On January 15, 2013 at 8:50 PM, MegaShort (99.95) wrote:

There are a lot of Canucks on cornerofberkshireandfairfax.ca. ALS, FTP, and of course FFH are the most popular Canadian companies.

kelpie capital and AAOI have written about a couple of Canadian companies including CFW, EGD, PSD and SND. http://kelpie-capital.com/2012/07/01/kelpie-capital-july-factsheet-value-will-out/  http://www.aboveaverageodds.com/analysis/ 

I forget where I saw PBG and FRC but remember they were very good writeups! CRBN I found on my own.

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