Saturday, March 28, 2015

Financial Planning: Weekend Update - March 28

This week was pretty dismal: 3 solidly down days, a flat Thursday and an anemic Friday. But income investors don’t get too worked up about ordinary volatility. Q1 earnings season is beginning with plenty of warnings, many apparently due to the strong dollar’s impact in international trade. That might be of concern, but even if a few positions get hit over the next month or so they'll still keep paying dividends and any spare cash laying around can be used to average down on the hardest hot stocks.

INTC was the big excitement on Friday afternoon when rumors broke that it was buying Altera, a major manufacturer of FPGAs (Field Programmable Gate Arrays). Intel closed up $1.92 for a 6.38% gain and popped my position into the money. Altera (ALTR) shot up 28.39%.

The portfolio is in good shape however. Only half the positions are in the money - not surprising after a week like this. The one small net loss position isn't an issue either as long as the MO doesn’t fall too far past my cost basis of $51.39. At this point my worst case scenario will be to write a farther out call in April.

Even with the down week, there’s still a good chance a major portion of the portfolio will be assigned next month. This will give me an opportunity to re-allocate a little. My current thought is to re-purchase only one of the Electric Utilities (ETR) and one of the Oils (COP). The remaining funds will be allocated into INTC (I don't expect Friday's jump to hold), MO (maybe), and F reducing my cost basis in those stocks

If SNY is assigned I’m currently looking at MRK and ABBV as possible replacements.SNY has a great dividend and obviously has legs in terms of capital appreciation... BUT... it's an ADR and that means there's some currency risk and there are fees involved with the payment of dividends. So even though it still looks like a great pick, I think I want to eliminate those potential, complications from my portfolio.

I like KO and will re-purchase it should I be assigned. Next time I’ll write the calls a little more out of the money.

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