Below is a sample 'Analysis Sheet' used by the Covered Calls Advisor to evaluate each potential covered call position. The sheet shown below is for the Covered Calls Advisor Portfolio current position in McDonald's. It is presented using ZOHO Sheet to enable you, the reader, to view not only the numbers on the sheet, but also the formulas used in each cell if you choose to do so. Unfortunately, the ZOHO Sheet takes several seconds to load so some patience is required before you are able to navigate it.
The seven columns on the 'Analysis Sheet' are as follows:
1. Input Description
2. Input Value -- The financial data manually keyed into the sheet.
3. Category -- There are ten analysis categories used.
4. Financial Metrics -- A brief description of the financial measure being calculated.
5. Actuals -- The calculated value for the associated financial metric.
6. Ratings Methodology -- The point value assigned to each range of values for each financial metric.
7. Points -- The points achieved for that particular financial metric based on the 'Actuals'(#5 above) and where they fall within the 'Ratings Methodology'(#6 above) range.
In addition, a 'Summary of Results' is shown at the bottom center section of the sheet. The 'Actuals' column shows the points achieved for each category as well as the total for all ten categories. The final summary column labeled 'Achieve' shows a YES or NO which indicates whether the desired threshold was or was not achieved for each category. A grand total of 80 points or more is required to achieve the overall threshold for the covered call position being analyzed -- reaching this level is equivalent to a 'Buy' for establishing the position.
Preparing each 'Analysis Sheet' typically requires about 20 minutes of data collection and data entry. This advisor primarily uses Schwab.com data resources to capture the requisite information. A prior article (Covered Calls Selection Process link) described how the number of potential covered call investment candidates are narrowed down to a manageable number. Typically, about 30-40 covered call 'Analysis Sheet' positions are completed each month to identify 10-20 investments.
This level of detailed analysis for each potential position is more effort than many covered call investors feel is warranted for analyzing a particular position. These feelings are expected and they're fine, because each person should seek his/her own approach, criteria, and comfort level when making covered call investing choices.
This 'Analysis Sheet' is a work-in-progress. Rarely does a month go by without some tweak to the methodology, and continued future modifications will undoubtedly occur. I hope this article has provided you some useful ideas and that it might stimulate your thinking regarding your own covered calls selection methodology.
Regards and Godspeed
Wednesday, November 7, 2007
Monday, November 5, 2007
On Being ASCCT Readers
This article describes five techniques we should apply whenever we are reading investing-related information. We should seek to be ASCCT readers – that is Avid, Selective, Careful, Critical, and Thoughtful readers. Applying these five techniques will enable us to improve our ability to absorb and utilize the financial information we read so that we can ultimately be more successful as Covered Calls investors. I ask your forbearance in allowing me to express the following small bit of my personal philosophy on investing success and the associated importance of reading:
“Success comes from the application of knowledge.
Knowledge comes from seeking and absorbing truthful information.
Truthful information comes from listening, reading, thinking, and analyzing.”
So to become a more successful Covered Calls investor, reading is an essential and fundamental tool.
Below is a more detailed presentation of the five keys to success in reading investing-related information:
1. Be an ‘Avid’ Reader – An ‘avid’ reader describes someone who simply loves to read. And if you really enjoy investing, which covered call investors invariably do, then you should probably be spending an average of a minimum of two hours a day reading investing-related information.
2. Be a ‘Selective’ Reader – As you know, there’s an incredible volume of investing information available for reading. So how do we focus on quality investing information and avoid the extraneous ‘noise’?
3. Be a ‘Careful’ Reader – This is very important! Because of the huge volume of items available to read, there is a natural tendency to speed-read or skim what we are reading so we can cover even more total quantity of material. Don’t do it!! If we have carefully chosen to read only ‘quality’ investing information (see step #2 above), then we must commit ourselves to fully read and concentrate on every sentence we are reading, and to read deliberately enough so that we seriously try to fully understand everything the author is trying to convey to us. You’ll be amazed at how much more in-depth understanding you can achieve by committing yourself to ‘careful’ reading.
4. Be a ‘Critical’ Reader –You already know this, but it’s worth repeating over and over again – “Don’t believe everything you read!” Utilize the analytical ability God gave you to critique the information you’re provided. Some of it will be totally true, some will be partially true, and some will be downright wrong. Analyze, analyze, analyze until your gut feeling provides you increasing confidence that you are getting closer to the truth in whatever the particular subject you are reading about.
5. ‘Think’ About What You Have Read – The final critically important part of analyzing what we’ve read is simply thinking about it. This skill requires us to devote some quiet time to think about what we’ve read to assess its validity and what further analysis you might need to undertake. Find time (go for a walk; or sit in your favorite lounge chair; or whatever else works for you) and cut off the extraneous noise and other competing activities and think about what you’ve read. By the way, Warren Buffett is a great proponent of this quiet time thinking technique.
I hope you agree that to be a successful covered calls investor, we need to read avidly, selectively, carefully, critically, and thoughtfully. “ASCCT” if it helps you to remember it. I invite you to please try this approach during the next month. I’m confident you’ll be pleasantly surprised at how your investing knowledge, savvy, and confidence will begin to grow.
“Success comes from the application of knowledge.
Knowledge comes from seeking and absorbing truthful information.
Truthful information comes from listening, reading, thinking, and analyzing.”
So to become a more successful Covered Calls investor, reading is an essential and fundamental tool.
Below is a more detailed presentation of the five keys to success in reading investing-related information:
1. Be an ‘Avid’ Reader – An ‘avid’ reader describes someone who simply loves to read. And if you really enjoy investing, which covered call investors invariably do, then you should probably be spending an average of a minimum of two hours a day reading investing-related information.
2. Be a ‘Selective’ Reader – As you know, there’s an incredible volume of investing information available for reading. So how do we focus on quality investing information and avoid the extraneous ‘noise’?
3. Be a ‘Careful’ Reader – This is very important! Because of the huge volume of items available to read, there is a natural tendency to speed-read or skim what we are reading so we can cover even more total quantity of material. Don’t do it!! If we have carefully chosen to read only ‘quality’ investing information (see step #2 above), then we must commit ourselves to fully read and concentrate on every sentence we are reading, and to read deliberately enough so that we seriously try to fully understand everything the author is trying to convey to us. You’ll be amazed at how much more in-depth understanding you can achieve by committing yourself to ‘careful’ reading.
4. Be a ‘Critical’ Reader –You already know this, but it’s worth repeating over and over again – “Don’t believe everything you read!” Utilize the analytical ability God gave you to critique the information you’re provided. Some of it will be totally true, some will be partially true, and some will be downright wrong. Analyze, analyze, analyze until your gut feeling provides you increasing confidence that you are getting closer to the truth in whatever the particular subject you are reading about.
5. ‘Think’ About What You Have Read – The final critically important part of analyzing what we’ve read is simply thinking about it. This skill requires us to devote some quiet time to think about what we’ve read to assess its validity and what further analysis you might need to undertake. Find time (go for a walk; or sit in your favorite lounge chair; or whatever else works for you) and cut off the extraneous noise and other competing activities and think about what you’ve read. By the way, Warren Buffett is a great proponent of this quiet time thinking technique.
I hope you agree that to be a successful covered calls investor, we need to read avidly, selectively, carefully, critically, and thoughtfully. “ASCCT” if it helps you to remember it. I invite you to please try this approach during the next month. I’m confident you’ll be pleasantly surprised at how your investing knowledge, savvy, and confidence will begin to grow.
Friday, November 2, 2007
Recommended Reading
In the right-hand column of this blog site, I’ve just added a section called ‘Recommended Reading'. This list provides links to those sites that I consider as essential regular reading for my own investing education.
A short description of why I like each site is as follows:
1. General Financial Media Sites:
• Barrons – This is my favorite site for high-quality investing-related information. It is a true bargain at $79/year for the online-only service.
• Bloomberg – Good news source for worldwide financial news.
• MarketWatch – Good overall stock market information site. Others you might consider instead of this one are Yahoo Finance or CNN/Money.
2. The Big Picture:
• Bespoke Investment Group – If you like quantitative finance as I do, especially charts and graphs, then definitely check out this site.
• Briefing.com – Good common sense investment analysis and advice.
• The Capital Spectator – Intelligent economic information and commentary.
3. Stock Investing
• Seeking Alpha – Well-organized aggregator of a variety of quality investing blog posts.
• Vinvesting – Aggregator of value investing information.
• GuruFocus – Tracks stock selections and holdings of many of the top stock market investors.
4. Stock Selection -- In a prior post (Stock Selection 101 link), I made a case for using two stock advisory services for identifying potential stock purchase candidates. The two used by this advisor are:
• Schwab Equity Ratings – Link
Note: you must have a Schwab account to obtain access to these ratings.
• MarketGrader.com – Link
Annual subscription price is $100.
This list of sites will certainly be modified over time -- I hope you've found some interesting new sites for your review on the current list. As a lifetime learner and avid reader, I’m always seeking additional excellent investing sites. I would certainly welcome hearing about your own personal favorite investing sites.
Regards and Godspeed
A short description of why I like each site is as follows:
1. General Financial Media Sites:
• Barrons – This is my favorite site for high-quality investing-related information. It is a true bargain at $79/year for the online-only service.
• Bloomberg – Good news source for worldwide financial news.
• MarketWatch – Good overall stock market information site. Others you might consider instead of this one are Yahoo Finance or CNN/Money.
2. The Big Picture:
• Bespoke Investment Group – If you like quantitative finance as I do, especially charts and graphs, then definitely check out this site.
• Briefing.com – Good common sense investment analysis and advice.
• The Capital Spectator – Intelligent economic information and commentary.
3. Stock Investing
• Seeking Alpha – Well-organized aggregator of a variety of quality investing blog posts.
• Vinvesting – Aggregator of value investing information.
• GuruFocus – Tracks stock selections and holdings of many of the top stock market investors.
4. Stock Selection -- In a prior post (Stock Selection 101 link), I made a case for using two stock advisory services for identifying potential stock purchase candidates. The two used by this advisor are:
• Schwab Equity Ratings – Link
Note: you must have a Schwab account to obtain access to these ratings.
• MarketGrader.com – Link
Annual subscription price is $100.
This list of sites will certainly be modified over time -- I hope you've found some interesting new sites for your review on the current list. As a lifetime learner and avid reader, I’m always seeking additional excellent investing sites. I would certainly welcome hearing about your own personal favorite investing sites.
Regards and Godspeed
Thursday, November 1, 2007
Returns -- Through October 2007
The overall performance results of the Covered Calls Advisor Portfolio (CCAP) will be presented monthly at the end of each calendar month. Results are based solely on the annualized percent change of the total dollar value of the CCAP.
For comparison purposes, the primary benchmark against which the portfolio’s performance will be measured is the Schwab MarketTrack Balanced Portfolio (SWBGX), a worldwide, diversified asset allocation fund. SWBGX typically contains approximately 46% domestic stocks (26% large cap; 20% small cap), 16% international stocks, 34% bonds, and 4% cash.
The CCAP was initiated on 9/14/2007 with an initial total portfolio value of $250,000.
At market close on 10/31/2007, the total portfolio value was $263,114.03, a $13,114.03 increase in overall portfolio value since inception.
CCAP Annualized Return = 40.7%
[(263,114.03-250,000)/250,000]*(365/47 days)*100
Annualized Return for SWBGX Benchmark = 31.6%
[(18.13-17.42)/17.42]*(365/47 days)*100
For comparison purposes, the primary benchmark against which the portfolio’s performance will be measured is the Schwab MarketTrack Balanced Portfolio (SWBGX), a worldwide, diversified asset allocation fund. SWBGX typically contains approximately 46% domestic stocks (26% large cap; 20% small cap), 16% international stocks, 34% bonds, and 4% cash.
The CCAP was initiated on 9/14/2007 with an initial total portfolio value of $250,000.
At market close on 10/31/2007, the total portfolio value was $263,114.03, a $13,114.03 increase in overall portfolio value since inception.
CCAP Annualized Return = 40.7%
[(263,114.03-250,000)/250,000]*(365/47 days)*100
Annualized Return for SWBGX Benchmark = 31.6%
[(18.13-17.42)/17.42]*(365/47 days)*100
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