Q&A: Mosaic Capital

Here, a reader questions whether she should be holding Mosaic Capital stock. Gordon Pape gives his answer.

Q – I am not a sophisticated investor and was badly advised by my then adviser who has recently been in trouble with the Securities Commission of B.C. Two of my investments went “out the window” and were total losses. The remaining one is Mosaic Capital based in Calgary. It has yielded 0.08% on my capital investment and gives me a monthly income of $833. That seems nice but I learned that 3% of that is the return of my own capital. How would you rate this company? – Sophia M.

A – Mosaic trades on the TSX Venture Exchange under the symbol M. It closed on July 29 at $8.85. It is an investment company that owns a portfolio of firms that operate in what are described as niche markets. They include Ambassador Mechanical, Printing Unlimited, Allied Cathodic Services, Polar Geomatic Solutions, Remote Waste, First West Properties, and Kendall’s Supply Ltd. For more information on these companies, visit the Mosaic website at www.mosaiccapitalcorp.com.

Mosaic’s stock has done very well in the past year, more than doubling in value. It hit a high of $9.79 in March then slumped to below $7 in early May before rallying to the current level.

First-quarter financial results were impressive. Revenue was up 29% year-over-year to $21.1 million while net income increased 92% to $4.6 million. The shares pay a quarterly dividend of $0.03 ($0.12 annualized) to yield 1.4% at the current price.

The company appears to be sound. However, the fact it trades on the Venture Exchange tells you this is a small-cap stock and that the risk may be on the high side. It seems like an unusual stock for an unsophisticated investor to own, especially if it makes up a large part of your portfolio as would appear to be the case. You could get a much higher yield by investing in a blue-chip telecom or utility, with less risk.

You may wish to find a new financial adviser with an investment approach that is better suited to your situation. – G.P.


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