The 'Lazy Buffett' Pitch: Can Alaris Equity Partners Deliver Passive Income?

A Motley Fool Canada column published on August 15, 2021 makes a pitch built around a single Warren Buffett idea: that complexity earns no premium. Its argument is that investors who want passive income do not need an elaborate or stressful strategy, and that the simplest route is often the best one. The stock it offers as the example is Alaris Equity Partners, listed on the Toronto Stock Exchange under the ticker AD.

The column frames Alaris as a kind of holding company. Holding companies invest in other businesses to draw a steady return from them. Buffett's vehicle buys whole companies or common equity, the piece notes, while some holding companies buy preferred stock, which carries a fixed-return element. Alaris belongs to the second group. It targets family-owned or founder-controlled small and mid-sized businesses across North America and supplies capital for expansion without asking the owners to give up control. According to the column, Alaris aims for annual returns of 13 to 15 percent on these investments.

The piece describes the business as exposure to asset management, with a focus on buyouts, growth capital, and mature investments. When lower-middle-market companies approach Alaris to recapitalize their equity, the company takes a non-controlled preferred equity position. The column says these investments have produced financial benefits and solid free cash flow, and that this cash flow has supported what it calls a massive dividend.

On the share price, the column reports that the stock is up 117 percent since March of 2020, though it is flat for 2021 so far. It presents that flat stretch as no obstacle, arguing the stock remains well suited to investors seeking passive income.

The dividend is the center of the case. The column cites a yield above 6 percent, paid quarterly, and calls Alaris an established dividend name whose payouts rest on predictable revenue streams from its partner businesses. It says the company has grown cash flow per share both organically and through new investments. On valuation, it states the shares trade at about five times sales and about one times book value, and describes them as relatively undervalued.

The closing section returns to Buffett. His wealth, the column says, was built on buying excellent businesses with large cash flows, but Berkshire Hathaway is now so large that it must absorb entire companies to make a difference. Alaris, by contrast, takes minority stakes and leaves control with founders. Its preference for preferred stock, the writer argues, secures recurring and stable cash flow, and that is why the shares have done well over the past year.

The column concludes that strong cash flow and the 6 percent yield make Alaris the right stock for a "lazy Buffett" approach. It is an opinion piece with a clear promotional bent, and its claims about dividend durability, the 13 to 15 percent return target, and valuation are the author's assertions rather than independent analysis. A reader weighing the idea would want to check the company's own filings on payout coverage and on the health of its partner businesses before acting.