A new covered calls position was established today in the Covered Calls Advisor Portfolio(CCAP) with the purchase of American Oriental Bioengineering Inc (AOB).
AOB is a Chinese manufacturer and distributor of more than 40 State FDA-approved prescription and over-the-counter pharmaceutical and personal health products. They have traded on the NYSE since 2006 and have a terrific growth history as well as future potential combined with a very attractive valuation. Through a combination of aggressive acquisitions and very good organic growth, AOB has a compounded annual growth rate in both revenue and earnings that exceeds 60% over the past 4 years. As a value proposition, its market cap is currently $380 million with an excellent balance sheet containing $220 million cash and only $126 million in debt (most at 4.5% that doesn't mature until 2015). The P/E ratio for 2008 is estimated at 6.2 and revenue and earnings growth should continue to expand in 2009 without the company needing to take on additional debt. The Covered Calls Advisor obtains international exposure primarily through the use of country-wide ETFs, which provides sector diversification in the most attractive countries for investments. This advisor only invests in individual companies outside of the U.S. where the investment case is very compelling both from a growth and value perspective -- and this is clearly the case with AOB.
Established American Oriental Bioengineering Inc (AOB) Covered Calls for Dec08:
11/24/08 Bought 1500 AOB @ $4.91
11/24/08 Sold 15 AOB Dec08 $5.00 Calls @ $.40
Annualized Return If Unchanged (ARIU): +113.6%
Annualized Return If Exercised (ARIE): +140.1%
Downside Breakeven Protection: 8.1%