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February Portfolio Recap

|Includes:AAPL, BDX, HYG, K, MSFT, OHI, SPDR S&P 500 Trust ETF (SPY), T

February was a much quieter month for both the markets and our actively managed portfolio, the latter due to Holiday travel. Through March 5, 2012 the S&P 500 (NYSEARCA:SPY) is up over 8.4%, adding 3.1% to its January gains. Our portfolio is up just over 12.5% YTD, outpacing the benchmark (SPY) by nearly 50%.

Notable additions to the portfolio in February include (NYSE:K), (NYSE:BDX) and (NYSE:NLY). We removed our (NYSE:CHK) position after a rapid run-up in early February. In addition, we closed out our position in (NASDAQ:RRD), and trimmed positions in (ZMH) and (NYSE:TGP).

We remained active hedging the portfolio with covered-call selling. Presently, 58% of the portfolio is hedged with covered calls, up from 39% at the end of January. Overall, the portfolio is hedged against 5.5% market decline. I remain committed to this hedging practice, as I see risks of a pause or pull-back in recent market activity.

At 1,364, the market is at a critical level as it tries to digest the 2011 highs. I expect this level to remain an important battleground for the bulls and bears. In the short term, downside risk of 2.5% - 5.5% looks possible. Longer-term, I maintain my 1,440 target price in the S&P.

Overall Sentiment: Near-term cautious.
Portfolio Yield: 5.3%
Projection: Consolidation (+/- 5%) around 1,365.

Top 5 Positions:

  1. iShares High Yield Corporate Bond (NYSEARCA:HYG)- 15.5%
  2. Apple (NASDAQ:AAPL)- 5.5%
  3. Microsoft (NASDAQ:MSFT)- 4.9%
  4. AT&T (NYSE:T)- 3.2%
  5. Omega Healthcare Investors (NYSE:OHI)- 3.2%

Disclosure: I am long HYG, AAPL, MSFT, T, OHI, BDX, K, TGP, ZMH.

Stocks: SPY, HYG, AAPL, MSFT, OHI, T, BDX, K