Seeking Alpha


Send Message
View as an RSS Feed
View REHeakins' Comments BY TICKER:
Latest comments  |  Highest rated
  • Why Value Investors Are Going To Cash [View article]
    Consider writing a covered call. An example would be buying KO @ $40.46 and selling the Jan. 2014 36.25 call. The option is trading @ $4.70 which only gives you a $.50 profit if called away in Jan. or earlier. What it does for you is give you a cost basis $35.76 and a dividend yield of approx. 3.11%. If the stock is called away earlier than Jan. you will make a return greater than money market from the dividend and if not your entry point will end up being at a price that should meet your "value screen" purchase price.
    Apr 4 04:00 PM | 5 Likes Like |Link to Comment
  • Just Energy Could Double Or Triple [View article]
    Great comments. I view this article as authors attempt to attract buyers in a stock that they have in their clients portfolios and in their own accounts. There is no reason to own this stock. In September 2012 the trading volume was 1/10th what it is today. Investors or insiders are selling (on down days the volume is 60% higher than on down days. It even looks like the company has a negative book value. Richard Kinder, CEO of KMI pays himself $1 a year and no executive at KMI earns more than $300,000 including all incentives.
    Mar 29 11:01 AM | 3 Likes Like |Link to Comment
  • MLPs Are Getting Crushed [View article]
    Investors that are selling stocks that pay dividends because the tax rate on dividends are going up are planning to put their money where? Putting your money in a coffee can so as not to pay tax leaves you with nothing which is less than the after-tax return on dividends. Do we believe that "interest" is going to be taxed at a lower rate than dividends will be? Maybe the market is falling because the macro is looking worse and earnings are not growing as fast as they had been. I believe that the US has already entered a recession, which will continue to put pressure on corporate earnings thus PE ratios are starting to contract.
    Nov 16 12:32 PM | 2 Likes Like |Link to Comment
  • Last Chance To Sell Gold And Silver [View article]
    Investors definitely have a "love - hate" relationship with Gold & Silver. They love to own it as long as the value is not dropping. Similarly to energy stocks, they love to see them rise but hate to pay more at pumps. The difference between a portfolio holding energy companies and the popular ETFs of gold and silver is investors see dividend checks regularly hitting their accounts, unlike the GLD & SLV. We solve this is issue by selling covered calls on these positions thus generating some cash flow, and if the shares are called away they take a profit on a position that investors have a hard time closing out of because they always are looking for more. We just made a recommendation of going long (SLV) and writing an out-of-the-money covered call as another way of playing an investment in silver. Our article, and others, can be found at blog.myoaktreeadvisors...
    Feb 19 12:13 PM | 1 Like Like |Link to Comment
  • A Hot Dividend Stock With High Options Yields That's Still Undervalued [View article]
    Good article on ESV. May I recommend selling the March 2013 57.50 Call Option. The option was quoted at the close Friday at 4.40 and ESV closed at 58.13. In this trade you earn 2 dividends ($75) and ($377) if the stock gets called away, $452 minus commissions for holding a $5813 investment for 146 days. At OakTree Investment Advisors we are students of the "Business Cycle" and we see it contracting as evidenced by some of the earnings released last week. Therefore we are selling in the money calls at this time, even covering some existing out of the money positions and replacing them with in the money calls. For more conservative investors I would even recommend selling the March 2013 55 calls keeping in mind this stock has a Beta of 1.39, therefore not suitable for most investors who would consider themselves with a moderate risk tolerance. PS; ESV is one of Neil Kashkari favorite picks.
    Oct 28 12:46 PM | 1 Like Like |Link to Comment
  • Covered Calls For Income Can Cost Dearly In Long-Term Gains [View article]
    At OakTree Investment Advisors we use covered calls to increase income and reduce risk. That doesn't mean we are always using this strategy. As students of business cycles and professional client's of ECRI, we selling "in the money" covered calls when we see a contraction unfolding and "out of the money" calls when the business cycle is expanding. Keep in mind that owning stocks are not suitable for everyone and that some investors are conservative and do not want to experience drops of 40% during a bear market. That said, long term aggressive investors should not use covered calls as a strategy, therefore they will always be long the 10 banger or long the dog and can not use this as a reason why selling covered calls do not work. For educational information on covered calls or business cycles feel free to go to (blog.myoaktreeadvisor... Good luck and I hope all you conservative investors profits on your next 1000 trades that are called away.
    Sep 28 06:12 PM | 1 Like Like |Link to Comment
  • 5 Tech Covered Calls To Consider [View article]
    I have been using covered calls for 30 years and can't think of a good reason to sell out of the money calls on tech stocks. Other than AAPL the other companies have a beta over 1 and are probably not suitable for investors looking for income or "in an endless search for income". If you are looking at these tech stocks as investments you are concerned more with growth, and an out of the money Call would only work to stymie your efforts. I would use in the money calls when the business cycle is turning over and was interested in taking some risk off the table, as I can lower my cost basis and still retain the stock in the portfolio - if that is the most suitable course of action for the client. If an investor is looking for income and wanted to enhance their returns they should look for companies that have a good history of raising dividends and a beta below 1. These are the types of companies we recommend employing the Covered Call Strategy on for investors looking for a steady stream of enhanced income. On our blog (blog.myoaktreeadvisor... are some educational articles that discuss using covered calls along with information on using business cycles to help one decide when to use "in the money" or "out of the money" calls.
    Sep 21 02:40 PM | 1 Like Like |Link to Comment
  • Considering The Opportunity Costs Of 'Trading Dividends' [View article]
    Buy and hold was a great strategy through the eighties and nineties and up to 2008. But, we are entering a period of a lower growth economy (GDP trendline of 2% versus 4%) therefore we will experience more frequent recessions getting back to the norm. US expansions do not historically last 7 to 8 years like most of us have experienced. Therefore only time will tell if buy and hold will work during the next 10 to 20 years. My thoughts are that it will not be as productive and investors will need to be more nimble.
    Sep 21 09:38 AM | 1 Like Like |Link to Comment
  • Exporting American Natural Gas: Smart And Strategic Energy Policy? [View article]
    XOM wins even if we have a good comprehensive energy policy that pushes for transportation to start using more natural gas. The Honda civic that runs on natural gas has been around for years but is only sold in CA to my knowledge. Has this changed recently?
    Sep 19 02:56 PM | 1 Like Like |Link to Comment
  • Why A Potential Earnings Warning From Intel Is Irrelevant [View article]
    At OakTree Investment Advisors our foundation is built on macroeconomics, which has been telling us that a global slowdown is upon us and not letting up. This said, INTC will be a survivor coming out of the upcoming global recession. If you're thinking about buying INTC or if you own it consider selling a covered call. As a slow down approaches we sell "in the money" calls on our existing positions or if we are taking on new "low beta" stocks that have already seen a drop in price we would sell "at the money" calls. When one looks at the average bear market you find an average correction of 40%, INTC is already down 15%, selling an April 2013, 24 call for 2.15 takes 8.6% of your investment out of the market limiting your downside to 16% minus the dividends. During 2008 our clients experienced an average decline of 19% versus the market loss of 38%. Selling covered calls is not the answer to all, but it helps keep investors from panicking during extremes. If interested in covered calls we have some educational articles posted on our blog at blog.myoaktreeadvisors. PS good article Ashraf and good comments Stockgal87.
    Aug 30 10:01 AM | 1 Like Like |Link to Comment
  • Intel: Cash In Some Chips On A Regular Basis [View article]
    At OakTree Investment Advisors we like Intel as a core holding in our client's portfolio. We also recommended it on our blog (blog.myoaktreeadvisor... when the stock was trading just above $26 and sold a $25 covered call expiring in JAN. We are professional clients of ECRI and use business cycle analysis to decide to use "in the money" or "out of the money" calls. I would buy INTC at today's price and sell the $24 or $25 or both.
    Aug 24 04:36 PM | 1 Like Like |Link to Comment
  • McDonald's (MCD) reports that global comparable sales were flat for July, with sales in the U.S. down 0.1% after estimates called for a 2.2% gain. Similar sluggishness was seen in Europe and Asia, suggesting a broad loss of market share could be in play. Shares of MCD -3.1% premarket. [View news story]
    A good way to buy MCD would be marry it with a covered call. Buy 100 shares of MCD ($8760) and sell the Mar 2013 90 Call @ 2.70 ($270). If the stock gets called away in March your yield would be a 13.40% annual return. If not look at your investment in March as owning 100 shares. of MCD at a cost of $8760 - $270 (call premium) - $210 (dividend) = $82.80 per share paying a dividend of $.70 quarter for a 3.38% yield until they raise the dividend. For some educational information on covered calls you can go to I have been selling covered calls since 1982.
    Aug 8 04:09 PM | 1 Like Like |Link to Comment
  • Using Covered Calls To Increase Your Yield: Gravy For A Dividend Growth Portfolio [View article]
    Bill you don't buy puts to cover your calls. Since the call is covered you own the underlying stock. A covered call reduces your downside and limits your upside. It also reduces the volatility in your portfolio.
    Jun 9 08:23 PM | 1 Like Like |Link to Comment
  • What if It Is a 'V' Recovery? [View article]
    Why would Laksman go on CNBC and tell the world everything the leading indicators are telling him? As a subscriber I would not be very happy if he gave all the data to everyone for free. In November 2005 the leading indicators were pointing to a downturn in home prices. This information was relayed to me and I sold all my positions in housing related companies. As the indicators pointed to a downturn in financials I sold off my financials except local bank stocks. In April 2008 on a confrence call Laksman told me he wouldn't be surprised if we had a another Bears Stern. My clients are happy since I have beat the S&P (total return) for the last 5 years by 5.4% annually thats in great part to the calls made by ECRI and did it by taking 35% less risk than the market experienced.

    Ronald E Heakins

    On Sep 06 03:44 PM John Lounsbury wrote:

    > aa4aa - - -
    > In the middle of March, 2008, Lakshman was on CNBC and stated that
    > ECRI data indicated a recession had already started. That was a full
    > nine months before the official pronouncement was made. I will concede
    > that (as I remember it) he declined to speculate about how long or
    > how deep the recession would be.
    > I agree that the risk of inflation and deflation are both significant.
    > You tell me how government and Fed policies will change or not change
    > over the next twelve months and I'll start leaning one way or the
    > other.
    > MarcVdB - - -
    > I agree with you that the ECRI model has limitations. But so do you
    > and I. That does not stop us from sharing our analysis, thoughts
    > and observations with the world.
    > The ECRI model doesn't stink. It doesn't even smell bad. But it also
    > was not written on a stone tablet in biblical times. It has not been,
    > is not and never will be perfect. However, let us not deny the good
    > in looking for the perfect.
    > On Sep 06 01:56 PM aa44aa wrote:
    Sep 8 05:52 PM | 1 Like Like |Link to Comment
  • Go Long Goodyear Tire & Rubber And Hedge With A Call Option [View instapost]
    Thanks for the comments. The posting comes from our "Covered Call Focus Blog" which we have been publishing for almost 2 years. In our blog we try to hit some of the points but as you pointed out we did not cover all of them. We try to keep it uncomplicated thus easy to read and not to long in the tooth. Not necessarily sure it's the right strategy but we consistently have over 7000 visits per month. Happy New Years!
    Dec 31 01:35 PM | Likes Like |Link to Comment