Wednesday, March 12, 2014

Bought & Sold Alaris Royalty Corp in 48 hours

Back in January, I mentioned that I planned to set aside some money in my TFSA in order to take advantage of market over-reactions. The vast majority of my investment portfolio is invested in companies that regularly grow their dividends/distributions. These are companies I'm comfortable owning for the long-term, that have proven histories of sales/earnings/profit growth to back up their dividend/distribution increases.

When Alaris Royalty Corp (TSX: AD) announced their 2013 results on Monday morning, I couldn't believe the market reaction to the company's fantastic results - the stock fell over 5% on record earnings! Granted, Alaris is currently in the midst of sorting out a non-material (in my estimation) tax issue with the Canada Revenue Agency ("CRA"), but I knew that Mr. Market was over-reacting by beating down the stock. 

With the stock down 5%, the dividend yield (which has a history of growing strongly) at around 5%, and with my stash of 'hedge fund' cash in my TFSA ready, I bought 200 shares at the end of the day at $29.50. Then it was just a matter of waiting for investors to come to their senses and realize Alaris's stock had been unfairly beat down due to a minor dispute with CRA. 

In less than 48 hours, I decided the stock had bounced back enough, and sold my 200 shares at $30.40. After subtracting the $20 in transaction fees, I netted a $160 profit (2.7% of my investment) in less than two days. 

Not all trades with my 'hedge fund' money will be this easy, but I'm extremely happy to get off to a positive start with my side project for 2014. 

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