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Monthly Income Portfolio – July Update

July Results - Click to enlarge

In the past, we have been expressing the view the equity markets were oversold and a rebound was likely to occur at any time.  Last week’s oversized bounce was probably due to two factors, the parliamentary vote in Greece forestalling a near term default event and the end of QE2 with the resulting bubble in the Treasury market that began deflating.  For the time being rising interest rates are reflecting a return to the “risk-on” condition.

As we caught an upturn in the market, all of our positions are deep in profits. We have captured 90% or more of the total profits in most of our put positions. Even though we are 10 days from expiration of July options, we will take profits on all five positions today. This will give us a total of $3,992.50 profit in less than one month. This is a return of 3.99% on the starting balance of $100,000. These positions were initated on June 27 so we are only 6 trading days (8 total days) into the trade. This is an annualized return of 182% which is hard to beat in most portfolios. Here is the positions today before selling them (see July Results).

Since July options expire on July 16, we will add new positions for August expiration.  We closed all July put positions so we did not get any stock put to us.  The new positions are shown in the chart below (see new positions).  We will write more puts on Under Armour (UA), Cummings (CMI) and Coach (COH): all with new strike prices in August 2011.  We will add two new stocks with put writes: MetroPCS Communications (PCS) and Celgene (CELG).    This creates a total of $6,190 in premiums received from selling August puts from these new positions (see the breakdown by position in chart).   This is a return of 5.98% based on the portfolio value of $103, 579.37 shown in chart.   In addition we invested $3,978 of our profits in 650 shares of Alpine Total Dynamic Dividend Fund (AOD) which pays a monthly dividend and has a yield of 10.7%.  We will continue to invest profits in monthly dividend payers.

New Positions - Click to enlarge

Under Armour, Inc. (UA) is engaged in the development, marketing and distribution of branded performance apparel, footwear and accessories for men, women and youth. The Company’s products are sold worldwide and are worn by athletes at all levels, from youth to professional, on playing fields around the globe, as well as consumers with active lifestyles. Its products are offered in over 23,000 retail stores worldwide. Most of its products are sold in North America. The Company’s trademarks include UNDER ARMOUR, HEATGEAR, COLDGEAR, ALLSEASONGEAR and the Under Armour UA Logo. The Company’s product offerings consist of apparel, footwear and accessories for men, women and youth.
Cummins Inc. (CMI) designs, manufactures, distributes and services diesel and natural gas engines, electric power generation systems and engine-related component products, including filtration, exhaust aftertreatment, fuel systems, controls and air handling systems. The Company sells its products to original equipment manufacturers (OEMs), distributors and other customers worldwide. It has four segments: Engine, Power Generation, Components and Distribution. It serves its customers through a network of more than 600 company owned and independent distributor locations and more than 6,000 dealer locations in more than 190 countries and territories. In November 2010, it purchased a majority interest in a previously independent North American distributorship. On January 4, 2010, it acquired the 70% interest in Cummins Western Canada (CWC). In April 2011, the Company sold its exhaust business to Global Tube.
Coach, Inc. (COH) is a marketer of fine accessories and gifts for women and men. Coach’s product offerings include handbags, women’s and men’s accessories, footwear, business cases, jewelry, wearables, sunwear, travel bags, fragrance and watches. Coach operates in two business segments: Direct-to-Consumer and Indirect. During the fiscal year ended July 3, 2010, the Company introduced Poppy, which offers a variety of silhouettes. It also introduced additional lifestyle collections. The accessories include women’s and men’s small leather goods, novelty accessories and women’s and men’s belts. The Company’s footwear is distributed through select Coach retail stores, coach.com and over 950 United States department stores. The wearables category consists of jackets, sweaters, gloves, hats and scarves, including both cold weather and fashion. During fiscal 2010, Estee Lauder Companies Inc., through its subsidiary, Aramis Inc., became Coach’s fragrance licensee.
MetroPCS Communications, Inc. (PCS) is a wireless telecommunications provider in the United States measured by the number of subscribers served. The Company offers wireless broadband mobile services under the MetroPCS brand in selected metropolitan areas in the United States. The Company provides a variety of wireless communications services to its subscribers on a no long-term contract, paid-in-advance basis. As of December 31, 2010, the Company had approximately 8.1 million subscribers. Its products and services include voice services, data services, custom calling features and advanced handsets. At December 31, 2010, the Company had thirteen operating segments based on geographic regions within the United States: Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota.
Celgene Corporation (CELG) is a global integrated biopharmaceutical company. The Company is primarily engaged in the discovery, development and commercialization of therapies designed to treat cancer and immune-inflammatory related diseases, such as immunomodulation and intracellular signaling pathways in hematology, oncology and immune-inflammatory diseases. Its primary commercial-stage products include REVLIMID, VIDAZA, THALOMID (inclusive of Thalidomide Celgene and Thalidomide Pharmion), ABRAXANE and ISTODAX. Other sources of revenue include sales of FOCALIN to Novartis Pharma AG (Novartis), which is a licensing agreement with Novartis, which entitles it to royalties on FOCALIN XR and the entire RITALIN family of drugs. On January 15, 2010, it acquired Gloucester Pharmaceuticals, Inc. (Gloucester), which is a privately held pharmaceutical company. On October 15, 2010, the Company acquired Abraxis BioScience, Inc. (Abraxis).

Covered Call Trades for June 2011

Below is the covered call trades for the June 2011 call options.  You purchase 100 shares of stock and sell 1 call for the covered call trade.  You can sell the at-the-money call (ATM) or you can sell one strike price below market price for a more conservative covered call.  The table provides the prices and volatility for the ATM strike prices.

Click to enlarge

 

MetroPCS Communications, Inc. (PCS) is a wireless telecommunications provider in the United States measured by the number of subscribers served. The Company offers wireless broadband mobile services under the MetroPCS brand in selected metropolitan areas in the United States. The Company provides a variety of wireless communications services to its subscribers on a no long-term contract, paid-in-advance basis. As of December 31, 2010, the Company had approximately 8.1 million subscribers. Its products and services include voice services, data services, custom calling features and advanced handsets. At December 31, 2010, the Company had thirteen operating segments based on geographic regions within the United States: Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota.
Microsemi Corporation (MSCC) is a designer, manufacturer and marketer of analog and mixed-signal integrated circuits and semiconductors. The Company’s semiconductors manage and control or regulate power, protect against transient voltage spikes and transmit, receive and amplify signals. Its products include individual components, as well as integrated circuit solutions. During fiscal year ended October 3, 2010 (fiscal 2010), the Company completed the acquisition of White Electronic Designs Corporation (White Electronic). During fiscal 2010, the Company completed the acquisition of VT Silicon, a designer and manufacturer of multi-band radio frequency integrated circuit (RFIC) solutions for the mobile wireless broadband market, During fiscal 2010, it acquired Arxan Defense Systems, Inc., a provider of anti-tamper solutions, providing full-service support to defense clients in securing systems against tampering, piracy and reverse engineering.
Chico’s FAS, Inc.  (CHS) is a specialty retailer of private branded, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing gift items under the Chico’s, White House |Black Market (WH|BM) and Soma Intimates (Soma) brand names. As of January 30, 2010, the Company operated 1,080 stores across 48 states, the District of Columbia, Puerto Rico and the Virgin Islands and e-commerce Websites for each of its brands. The Chico’s brand sells designed, private branded clothing focusing on women 35 and over with a moderate to high income level. The Chico’s brand controls the design process, including choices of pattern, prints, construction, design specifications, fabric, finishes and color through in-house designers, purchased designs, and working with its independent suppliers to develop designs.
Xerox Corporation (XRX) provides a portfolio of document technology, services and software, and the diverse array of business process and information technology (IT) outsourcing support. The Company has three segments: Technology, Services and Others. Technology includes the sale of products and supplies, as well as the associated technical service and financing of those products. the Company’s Services segment is consists of business process outsourcing, information technology outsourcing and document outsourcing services. The Company sells its products and services directly to customers through its world-wide sales force and through a network of independent agents, dealers, value-added resellers, systems integrators and the Web. In Europe, Africa, the Middle East and parts of Asia, the Company distribute its products through Xerox Limited.
USG Corporation (USG), through its subsidiaries, is a manufacturer and distributor of building materials, producing a range of products for use in new residential, new nonresidential, and residential and nonresidential repair and remodel construction, as well as products used in certain industrial processes. The Company is organized into three reportable segments: North American Gypsum, Building Products Distribution and Worldwide Ceilings, the net sales of which accounted for approximately 47%, 35% and 18%, respectively, of its consolidated net sales during the year ended December 31, 2009. North American Gypsum manufactures and markets gypsum and related products in the United States, Canada and Mexico. Building Products Distribution consists of L&W Supply, a specialty building products distribution business in the United States. Worldwide Ceilings segment manufactures and markets interior systems products worldwide.
Marvell Technology Group Ltd. (MRVL) is a fabless semiconductor provider of application-specific standard products. The Company develops complex system-on-a-chip (SoC) devices using its technology portfolio of intellectual property in the areas of analog, mixed-signal, digital signal processing and embedded advanced RISC machine (ARM)-based microprocessor integrated circuits. The Company’s product portfolio includes devices for data storage, enterprise-class Ethernet data switching, Ethernet physical-layer transceivers (PHY), handheld cellular, Ethernet-based wireless networking, personal area networking, Ethernet-based personal computer (PC) connectivity, control plane communications controllers, video-image processing and power management solutions. Its products serve applications used in carrier, metropolitan, enterprise and PC-client data communications and storage systems. Additionally, it serves the consumer electronics market for the convergence of voice, video and data applications.
Newfield Exploration Company (NFX) is an independent oil and gas company engaged in the exploration, development and acquisition of oil and gas properties. The Company’s domestic areas of operation include the Mid-Continent, the Rocky Mountains, onshore Texas, Appalachia and the Gulf of Mexico. Internationally, the Company operates in Malaysia and China. Mid-Continent division is focused primarily in the Anadarko and Arkoma basins. Its Greater Monument Butte is the Greater Monument Butte field area, located in the Uinta Basin of Utah. During the year ended December 31, 2010, approximately 82% of its proved reserves and 90% of its probable reserves were located in resource plays, primarily in the Mid-Continent and the Rocky Mountains. As of December 31, 2010, Newfield had proved reserves of 3.7 one trillion cubic feet equivalent. On February 11, 2010, the Company acquired some of TXCO Resources Inc. (TXCO’s) assets in the Maverick Basin of southwest Texas.
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