Retirement Strategy: Buy On Dips, Add To Core Holdings (Part 8)

| About: Intel Corporation (INTC)

Now that a new month is here, and we have seen an 11.7% total increase in our portfolio (read this) value from 11/23/2011, we can focus on taking some key actions that hopefully will give us even greater returns for our next review. Here are the actions we have taken.

Actions Taken 1/31/2011

The first order of business was to select the stocks from our portfolio that we wanted to sell calls on. In the chart that follows, you can see which month and strike price calls we have sold. The chart will also show the premium of each call and the total amount of cash received for this action.

The next action that was taken was to sell McDonald's (NYSE:MCD) at $99.00/share, giving us a $7.00/share profit plus the previous premiums and dividend received. My opinion on MCD is that it crossed its all time high and has backed off a bit and I feel we will see some resistance here. I also believe we can use the $9,900 to buy a few more shares of some of our "value" priced stocks. We are still staying within our core holdings however, which at this juncture I feel is prudent.

We have taken the $9,900 from the sale of MCD and we have purchased 100 more shares of Exxon Mobil (NYSE:XOM). The earnings came in a tad light but the shares sold off a bit too much in the face of rising oil prices and earnings that beat estimates. I think we will see a rebound back up to where it was, and even higher based on their own forecasting (Listen to their upcoming conference call).

That leaves us with $7,190 in cash reserves, which we will use to purchase 200 more share of Intel (NASDAQ:INTC) which I firmly believe is undervalued (read this report on the chip, server, PC business). Not only will we replace the dividend from MCD with a higher yielder, but also expand our exposure to the tech sector without venturing beyond our core portfolio for now.

With these changes, here is what our updated portfolio looks like:

stock sell calls 1-30-PPS Premium Cash Rcv'd #Shares 2/1 Value
XOM mar87.50 84/SHR 0.53 106 200 16800
JNJ none 66/SHR 0 0 100 6600
T none 29/SHR 0 0 100 2900
GE apr20.00 19/SHR 0.25 25 100 1900
NLY apr17.00 16/SHR 0.31 31 110 1760
EXC mar41.00 39/SHR 0.21 84 400 15600
PG mar65.00 63/SHR 0.41 82 200 12600
MCD n/a sold 0 0 0 0
PM jun80.00 75/SHR 1.2 120 140 10500
INTC mar28.00 26/SHR 0.17 51 300 7800
O none 36/SHR 0 0 100 3600
COP mar72.50 69/SHR 0.41 41 100 6900
PFE none 22/SHR 0 0 100 2200
CVX mar110 103/SHR 0.51 51 100 10300
DD mar52.50 50/SHR 0.19 19 100 5000
DUK none 21/SHR 0 0 100 2100
PPL none 28/SHR 0 0 2800
Total Rcv'd x x 610 109360
Click to enlarge

As you can see, we show the options sold, the amount we received in cash, and the updated number of shares as well as the new value of our portfolio.

We began our journey by investing $100,000 in our core portfolio that we developed right here on SA. That portfolio is now worth $109,360 plus we have $2,400 in cash reserves which includes the carryover from yesterday, as well as the $610 we received from selling calls.

Keep in mind that we are also positioned to receive the next round of dividends as well, which as you can tell is beginning to get interesting.

Our current portfolio consists of ExxonMobil , Johnson and Johnson (NYSE:JNJ), AT&T (NYSE:T), General Electric (NYSE:GE), Annaly Capital (NYSE:NLY), Exelon (NYSE:EXC), Procter and Gamble (NYSE:PG), Philip Morris (NYSE:PM), Intel , Realty Income (NYSE:O), ConocoPhillips (NYSE:COP), Pfizer (NYSE:PFE) Chevron (NYSE:CVX), E.I. du Pont (NYSE:DD), Duke Energy (NYSE:DUK), PPL Corp. (NYSE:PPL).

My Opinion

We have done a really good job thus far and have held our core intact. Now we have used our cash reserves as well as stock sale proceeds to make some lower risk value purchases while staying within our core and our investment strategy; buy on dip, add to core holdings.

We have a pretty good idea of how we will proceed with options, and now we can focus our attention on looking for a bargain or two.

Part 9 will be written next month, along with updates on our stocks in between.

Good work TEAM ALPHA!

Disclaimer: Please remember to do your own research prior to making any investment decisions. This article is not a recommendation to buy or sell any securities or stocks and is the opinion of the author.

Disclosure: I am long XOM, JNJ, NLY, GE, O, INTC, T.