by Rocco Pendola
As I introduced the $150,000 portfolio in three mid-September installments, I received plenty of feedback.
A fair share of it ridiculed my decision to go way overweight Starbucks (NASDAQ:SBUX).
In this article, I review the entire slate of holdings, including the big SBUX position. Some small moves need to be made, as September options expired over the weekend.
I close the article with more support for my SBUX bullishness.
Let's start with expired options. (Add everything in bold to get total portfolio value, including cash. I do not bank covered call income until the position expires or I close it.)
The SBUX September $52.50 calls expire worthless. The portfolio banks $375.
As for the stock, a long position consisting of 1,500 shares (cost basis: $50.73) up 0.8% with the stock at $51.16 (using Monday's closing prices). Position value: $76,740.
Going SHORT 15 SBUX October $55 calls at $0.22 each. Income: $330.
The Pandora (NYSE:P) September $11 calls expire worthless. The portfolio banks $150.
As for the stock, long consisting of 1,000 shares (cost basis: $9.91) up 9.9% with the stock at $10.89. Position value: $10,890.
Going SHORT 10 P October $12 calls at $0.25 each. Income: $250.
More on SBUX after I review the remainder of the portfolio, but, quickly on P, remember what I said - it's a law, anytime it drops under $10, it's a screaming buy.
The portfolio is LONG Disney (NYSE:DIS), Comcast (NASDAQ:CMCSA) and Duke Energy (NYSE:DUK) stock and SHORT October options in all three cases. As of Monday's close, the only covered call that is in-the-money is on CMCSA - the October $36 calls.
The following chart shows how the long positions in each of these names look:
|Stock||Entry Price||Current Price||% Gain/Loss||Value|
*Capped gain on CMCSA due to $36 covered call.
The follow chart tracks the three relatively speculative options positions in the portfolio:
|Facebook (NASDAQ:FB) Jan '14 $42 call||$1.00||$0.85||(15%)||$2,125|
|Lululemon (NASDAQ:LULU) Dec '12 $80 call||$5.90||$4.00||(32%)||$4,000|
|JP Morgan (NYSE:JPM) Jan '14 $45 call||$3.25||$3.05||(6.2%)||$6,100|
Cash (including banked covered call income): $980.
Total Portfolio Value: $164,690.
On Starbucks. If you didn't catch the Howard Schultz interview on CNBC last week, you really need to go back and see it.
The headline that came out of it, as is often the case, was not the story. Lots of folks, including CNBC, ran with the whole Europe is turning the corner thing, which is great news, no doubt. It was nice to hear Schultz compare what's happening over there with the epic U.S. Starbucks transformation.
What hit me harder, though, was Schultz reaffirming something followers of Starbucks already know. He is out in front of the future. There might not be a more underrated CEO. And as bullish as I am SBUX, I'm guilty of discounting him.
We talk about Steve Jobs and Jeff Bezos as these great visionaries. No doubt, they are. Both made/make a living out of creating and disrupting spaces. Each changed the world in major ways. That's great, but we really need to start including Schultz in that club.
Here's a little blurb from the CNBC summary of Schultz's appearance:
The mobile payments deal with Square will also put Starbucks "in a position to do things on mobile that perhaps no other consumer brand, and certainly no other retailer, has the capability to do, and you'll see that come to life in 2013," Schultz said.
Of course, the reference there is to the mobile payments deal Starbucks signed with Square, the company run by Twitter founder Jack Dorsey.
Couple this with the expansion of the business, Schultz has put into motion. He buys a juice brand. He buys a San Francisco bakery. He's selling beer and wine. A home coffee machine. And the market's not even saturated yet.
Here in Santa Monica, CA, Starbucks continues to grow. There's a location attached to a grocery store on one corner and another about to open as an anchor for a new condo development the opposite corner. That's commonplace in big and/or affluent cities across North America.
SBUX bears remind me of Amazon.com (NASDAQ:AMZN) bears. There's no objectivity. Always a negative spin. When either company branches out, bears cite "desperation" as the driver. It's actually all about growth and not only being ahead of the curve, but dictating the contents and trajectory of the curve.
That's what great companies do. Take Starbucks' ambitious mobile plans as the overarching theme. That's the poster child for the company's innovation with the other pieces representing less immediately exciting, but equally as important moves.
SBUX is a stock you can buy regularly, knowing you'll be in good shape short-term and over the long run. It's this very dynamic that keeps people coming back to their stores on a daily basis.
Wall Street has enough confidence in Schultz, like Bezos, to support the stock during periods of transition, growth and even a bit of uncertainty. Because in the long-term, CEOs like these two just get things done.
Disclosure: I am long FB, P. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.