A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Fluor Corp (FLR).
Fluor is an excellent example of a company whose price has been hit too hard as a result of the overall market decline and the rapid fall in the price of oil from $140+ per barrel to the $50 range. At $50, this advisor believes that oil has the potential for much less downside than upside in its future price; and when the oil price begins to increase again, Flour's stock price will likely move much, much higher. It is a preeminent, quality construction and engineering company with a primary emphasis on oil & gas construction and with the additional advantage of a strong worldwide presence (57% international revenue).
It is also a value-oriented investment; with its current P/E of 7 being only about 1/2 of its potential growth rate for the next few years. And the return-on-equity is good at 35%. Finally, in the most recent quarter, its contract backlog was 28% higher than for the same period last year.
Established Fluor Corp (FLR) Covered Calls for Dec08:
11/24/08 Bought 600 FLR @ $35.35
11/24/08 Sold 6 FLR Dec08 $35.00 Calls @ $3.50
Annualized Return If Exercised (ARIE): +129.9%
Downside Breakeven Protection: 10.3%
The annualized return shown above includes an ex-dividend on Dec. 3rd of $.125 per share.