TFSA Dividend Investors: 1 Pooled Fund Set to Outperform

Urbana Corp. (TSX:URB)(TSX:URB.A) monitors the private investments it makes on an ongoing basis by reviewing financial statements, engaging in discussions with management and monitoring market and industry conditions.

| More on:
young woman celebrating a victory while working with mobile phone in the office

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

In 2003, Urbana (TSX:URB)(TSX:URB.A) operated as a pooled fund concentrated in a single asset class by focusing on the securities marketplaces that were going public or merging. Over time, Urbana has become much more diversified in asset classes and geographic scope. Urbana’s investments have steadily grown in complexity and diversity. The company’s objectives and strategies are to invest in, private investment opportunities for capital appreciation and to invest in publicly traded securities to provide growth, income, and liquidity.

For some years, Urbana has invested a significant portion of the company’s portfolio, well in excess of 50% of investable assets, in liquid North American equities. This part of the Urbana portfolio generates dividends and is available for sale to generate proceeds that can be redeployed to other uses including private or less-liquid investments. Urbana anticipates that the percentage of the portfolio invested in private issuers will rise in the future.

Opportunistic portfolio composition

The composition of the portfolio depends, in part, on capital and investment opportunities available to the company and varies over time depending on several factors, including the state of financial markets. Public investment selection is done by Thomas Caldwell, the lead portfolio manager, specifically responsible for Urbana’s investment portfolio.

Urbana’s investment styles include deep value, arbitrage, momentum, and long-term value. The company takes short sale positions in certain circumstances and purchases and writes exchange-traded and over-the-counter put and call options on debt and equity securities, commodities, currencies, and indices.

To date, the investments in private issuers have tended to be concentrated in securities and investment management businesses but can extend to investments beyond the financial services sector. Private investments are acquired through participation in equity financings, purchase of long-term assets, financing start-ups, financings to fund specific issuer growth initiatives and by way of the purchase of foreign assets.

Diversified strategy

Urbana’s investment in private issuers can take the form of debt, preferred shares, and common equity or some combination of those. Urbana can, if a private investment shows promise, convert debt or preferred shares into common equity, which could allow the company to participate in an investee’s upside. Private equities are typically targeted for liquidation in a five- to 10-year period.

The company also participates, opportunistically, in mergers or buyouts. Urbana also exits debt investments through a repayment of the principal plus accrued and unpaid interest. When Urbana management makes private company investments, members of the board usually vet the investment opportunities.

Strong corporate governance

Audit Committee approval is required in respect of all transactions where a private investment is over $5 million. This demonstrates strong corporate governance on the part of Urbana. Any investment over $1 million in a start-up investee, or over $5 million in an established private investee needs to be approved by the board.

Furthermore, Urbana monitors the private investments it makes on an ongoing basis by reviewing financial statements, engaging in discussions with management and monitoring market and industry conditions. This level of due diligence provides a high probability that Urbana will outperform the general market over the long term.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.

More on Investing

Hands holding trophy cup on sky background

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Here are three top TSX growth stocks that may be worth a look, given the significant valuation declines these stocks…

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Man data analyze
Stocks for Beginners

Beginners: 2 Market-Beating Stocks Just Getting Started

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) and Constellation Software (TSX:CSU) are proven market beaters that could continue their ways.

Read more »

oil and natural gas
Energy Stocks

Small OPEC+ Oil-Output Hike: Buy More Energy Stocks?

Energy stocks could soar higher, because oil markets will remain tight due to the small production increase by OPEC+.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

edit Person using calculator next to charts and graphs

Where to Invest $500 in the TSX Right Now

Long-term investors can look to buy stocks, including Suncor Energy and Shopify, as they are poised to outpace the broader…

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

falling red arrow and lifting

2 Oversold TSX Stocks That Should Bounce Back

Stocks that are oversold without an external catalyst like a market crash or a weak sector might be risky buys,…

Read more »