Establish Oshkosh Corp. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Oshkosh Corp.(OSK) covered calls as follows:

Established Oshkosh Corp.(OSK) Covered Calls for Oct2010:
09/27/2010 Bought 300 OSK @ $26.46
09/27/2010 Sold 3 OSK Oct2010 $27.00 Calls @ $.80

Oshkosh Corporation designs, manufactures, and markets a range of access equipment, specialty vehicles, and vehicle bodies worldwide and operates in four busines segments. Its Defense segment manufactures severe-duty, heavy, and medium-payload tactical trucks for the Department of Defense, including hauling tanks, missile systems, ammunition, fuel, and cargo for combat units. The company's Access Equipment segment was added the Access Equipment segment in December 2006 when it purchased JLG for $3.2 billion. The segment manufactures aerial work platforms, scissor lifts and telehandlers (a mix between a cherry-pickers and a forklifts). Its Fire and Emergency segment provides custom and commercial fire apparatus and emergency vehicles, including pumpers, aerial and ladder trucks, tankers, light and heavy-duty rescue vehicles, wildland rough terrain response vehicles, mobile command and control centers, bomb squad vehicles, hazardous materials control vehicles, and other emergency response vehicles. Its Commercial segment produces and sells front and rear discharge concrete mixers, and portable and stationary concrete batch plants for the concrete ready-mix industry; and field service vehicles and truck-mounted cranes for the construction, equipment dealer, building supply, utility, tire service, and mining industries. This segment also offers lease financing to concrete mixer customers, concrete batch plant customers, and commercial waste haulers. The company was formerly known as Oshkosh Truck Corporation and changed its name to Oshkosh Corporation in February 2008. Oshkosh Corporation was founded in 1917 and is based in Oshkosh, Wisconsin.

The Covered Calls Advisor's "Buy Alerts" spreadsheet below shows that the total points of 17.90 exceeds the minimum purchase threshold of 16.0 points for a new investment. As shown below, the momentum factors (especially pricing momentum) are weak, but this weakness is more than overcome by the very strong value, growth, and profitability characteristics of Oshkosh Corp:





















Note: For expanded view, left click on the spreadsheet above.


Some possible overall performance results(including commissions) for this Oshkosh position would be as follows:
Stock Purchase Cost: $7,946.95
= ($26.46*300+$8.95 commission)

Net Profit:
(a) Options Income: +$228.80
= (300*$.80 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $26.46):
-$8.95 = ($26.46-$26.46)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $27.00): +$153.05
= ($27.00-$26.46)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $26.46): +$219.85
= (+$228.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $27.00): +$381.85
= (+$228.80 +$0.00 +$153.05)

Absolute Return if Unchanged at $26.46: +2.8%
= +$219.85/$7,946.95
Annualized Return If Unchanged (ARIU) +53.1%
= (+$219.85/$7,946.95)*(365/19 days)

Absolute Return if Assigned at $27.00: +4.8%
= +$381.85/$7,946.95
Annualized Return If Assigned (ARIA) +68.9%
= (+$381.85/$7,946.95)*(365/19 days)

Establish Medicis Pharmaceutical Corp. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Medicis Pharmaceutical Corp. (MRX) covered calls as follows:

Established Medicis Pharmaceutical Corp. (MRX) Covered Calls for Oct2010:
09/23/2010 Bought 300 MRX @ $29.27
09/23/2010 Sold 3 MRX Oct2010 $30.00 Calls @ $.55

Medicis Pharmaceutical Corporation, a specialty pharmaceutical company, engages in the development and marketing of dermatology products in the United States, Canada, and Europe. Acne and acne-related dermatological products accounted for 70% of net revenues, but its relatively new aesthetic product Dysport is an injectable anti-wrinkle treatment that is showing good potential as a Botox competitor. The company's growth strategy centers on expanding the market share of existing products, introducing new products, making synergistic acquisitions, and forming collaborative partnerships. Medicis was founded in 1987 and is headquartered in Scottsdale, Arizona.

The Covered Calls Advisor's "Buy Alerts" spreadsheet below shows that the total points of 19.37 is substantially above the minimum purchase threshold of 16.0 points for a new investment. As shown below, the value, profitability, and momentum factors are all very strong for Medicis:






















Note: For expanded view, left click on the spreadsheet above.


Some possible overall performance results(including commissions) for the Medicis transactions would be as follows:
Stock Purchase Cost: $8,789.95
= ($29.27*300+$8.95 commission)

Net Profit:
(a) Options Income: +$153.80
= (300*$.55 - $11.20 commissions)
(b) Dividend Income: +$18.00 ($.06*300 shares). Goes Ex-Dividend on 9/29/2010.
(c) Capital Appreciation (If stock price unchanged at $29.27):
-$8.95 = ($29.27-$29.27)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $30.00): +$210.05
= ($30.00-$29.27)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $29.27): +$162.85
= (+$153.80 +$18.00 -$8.95)
Total Net Profit(If stock price exercised at $30.00): +$381.85
= (+$153.80 +$18.00 +$210.05)

Absolute Return if Unchanged at $29.27: +1.9%
= +$162.85/$8,789.95
Annualized Return If Unchanged (ARIU) +29.4%
= (+$162.85/$8,789.95)*(365/23 days)

Absolute Return if Assigned at $30.00: +4.3%
= +$381.85/$8,789.95
Annualized Return If Assigned (ARIA) +68.9%
= (+$381.85/$8,789.95)*(365/23 days)

Establish Research In Motion Ltd. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Research In Motion Ltd. (RIMM) covered calls as follows:

Established Research In Motion Ltd. (RIMM) Covered Calls for Oct2010:
09/23/2010 Bought 300 RIMM @ $46.55
09/23/2010 Sold 3 RIMM Oct2010 $47.50 Calls @ $1.64
The Covered Calls Advisor's current Overall Market Meter is Slightly Bullish, and the corresponding strategy is to establish near-month covered calls at about 2% out-of-the-money. Thus, a limit order was in place to purchase RIMM only if it declined to $46.55 (which is exactly 2.0% below the $47.50 strike price). This order was executed in early trading today. Fortunately, this was the lowest price in today's trading range for RIMM -- and this is the first time since this Covered Calls Advisor blog was started in 2007 that a purchase was made at the lowest price for the day.

Research In Motion Ltd. (RIMM), founded in 1984, designs, manufactures, and markets wireless solutions for the worldwide mobile communications market and is best known for its BlackBerry wireless platform. Introduced in 1999, BlackBerry has found popularity primarily in the enterprise market (large corporations and government institutions), but has recently had success penetrating the consumer market to the point that now about half of total sales are consumer handsets. RIMM has over 50 million BlackBerry subscribers and strong growth continues based on the company's forecast that it will add 5.0 to 5.4 million net new subscribers during the current quarter. BlackBerry handheld units account for 79% of total revenue and services account for the bulk of the remaining sales. The portion of sales obtained internationally has grown to its current level of about 45%.

The Covered Calls Advisor's "Buy Alerts" spreadsheet below shows that the total points of 19.93 greatly exceeds the minimum purchase threshold of 16.0 points for a new investment and the key value and profitability metrics are both very strong. The company's cash flow is also strong, and it has used some of its cash to buy back about 8% of total shares outstanding in the first half of 2010 alone. Additionally (and very importantly), it is investing in future growth via its substantial research and development efforts. One result of these research efforts is expected to be its entry into the burgeoning tablet market. RIMM's product is rumored to be called the BlackPad and its release could be announced as soon as next week.

As part of the background research done on RIMM, the Covered Calls Advisor found these three recent articles to be especially worthwhile in confirming the current value available in purchasing RIMM stock:
1. The Peridot Capitalist blog
2. Barel Karsan Value Investing blog
3. Trefis' RIMM valuation article






















Note: For expanded view, left click on the spreadsheet above.


Some possible overall performance results(including commissions) for the RIMM transactions would be as follows:
Stock Purchase Cost: $13,973.95
= ($46.55*300+$8.95 commission)

Net Profit:
(a) Options Income: +$480.80
= (300*$1.64 - $11.20 commissions)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $46.55):
-$8.95 = ($46.55-$46.55)*300 - $8.95 commissions
(c) Capital Appreciation (If assigned at $47.50): +$276.05
= ($47.50-$46.55)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $46.55): +$471.85
= (+$480.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $47.50): +$756.85
= (+$480.80 +$0.00 +$276.05)

Absolute Return if Unchanged at $46.55: +3.4%
= +$471.85/$13,973.95
Annualized Return If Unchanged (ARIU) +53.6%
= (+$471.85/$13,973.95)*(365/23 days)

Absolute Return if Assigned at $47.50: +5.4%
= +$756.85/$13,973.95
Annualized Return If Assigned (ARIA) +86.0%
= (+$756.85/$13,973.95)*(365/23 days)

Establish Guess? Inc. Covered Calls

A new covered calls position was established in the Covered Calls Advisor Portfolio(CCAP) with the purchase of Guess? Inc.(GES) covered calls. Guess was one of the covered calls positions that was called away last Friday at Sep2010 options expiration and today it was decided to re-establish a new position for Oct2010 expiration as follows:

Established Guess? Inc.(GES) Covered Calls for Oct2010:
09/22/2010 Bought 300 GES @ $37.75
09/22/2010 Sold 3 GES Oct2010 $40.00 Calls @ $.55

Guess?, Inc. designs, markets, distributes and licenses its lifestyle collections of contemporary apparel and accessories for a style-conscious 18-to-32-year-old target audience of men and women around the world. In addition to wholesale and retail distribution channels, GES operates in 67 countries via its licensing and distributor partnerships. Apparel and accessories design teams are located in California in the U.S., and in Florence and Bologna, Italy. It offers collections of denim and cotton clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets, and knitwear. The company also grants licenses to manufacture and distribute a range of products that include eyewear, watches, handbags, footwear, kids' and infants' apparel, leather apparel, swimwear, fragrance, jewelry, intimate apparel, and other fashion accessories. Guess , Inc. markets its apparel under various trademarks, including GUESS, GUESS , GUESS U.S.A., GUESS Jeans, GUESS and Triangle Design, MARCIANO, Question Mark and Triangle Design, a stylized G and a stylized M, GUESS Kids, Baby GUESS, YES, G by GUESS, GUESS by MARCIANO, and Gc. The company sells its products through retail, wholesale, e-commerce, and licensing distribution channels. Guess operates 425 stores in North America and 96 stores abroad; licensees and distributors operated another 594 non-North American stores.

The Buy Alerts spreadsheet below shows that GES is an attractive value at this time since the total points rating of 16.40 exceeds the Covered Calls Advisor's desired "Buy" threshold of 16.0. Also very importantly, at its current price, the growth potential of the Guess brand seems under-appreciated by investors based on its potential growth drivers related to: (1) rapid expansion in Asia; (2) expanding new product categories; and (3) potential new store formats.





















Note: For expanded view, left click on the spreadsheet above.

Some possible overall performance results(including commissions) for the Guess? Inc.(GES) transactions would be as follows:
Stock Purchase Cost: $11,333.95
= ($37.75*300+$8.95 commission)

Net Profit:
(a) Options Income: +$153.80
= (300*$.55 - $11.20 commissions)
(b) Dividend Income: $0.00
(c) Capital Appreciation (If stock price unchanged at $37.75):
-$8.95 = ($37.75-$37.75)*300 - $8.95 commissions
(c) Capital Appreciation (If exercised at $40.00): +$666.05
= ($40.00-$37.75)*300 - $8.95 commissions

Total Net Profit(If stock price unchanged at $37.75): +$144.85
= (+$153.80 +$0.00 -$8.95)
Total Net Profit(If stock price exercised at $40.00): +$819.85
= (+$153.80 +$0.00 +$666.05)

Absolute Return if Unchanged at $37.75: +1.3%
= +$144.85/$11,333.95
Annualized Return If Unchanged (ARIU) +19.4%
= (+$144.85/$11,333.95)*(365/24 days)

Absolute Return if Exercised at $40.00: +7.2%
= +$819.85/$11,333.95
Annualized Return If Exercised (ARIE) +110.0%
= (+$819.85/$11,333.95)*(365/24 days)