We started 2010 with about 92% of our portfolio in stocks and the rest in cash. The portfolio size went up by almost 200% during the year, helped by a couple of one-time events: sale of our primary home in the USA as part of our rat-race exit strategy (read more here) that helped release the equity tied up there and certain close-out payments from our previous employments. The cash infusion had the effect of temporarily increasing our cash allocation from just 8% to a whopping to over two-thirds of our total portfolio value. To alleviate market timing risk, we embarked on allocating this cash to stocks over a period of three years. The downside with this strategy is of course that a lot of cash sits on the sidelines for an extended period of time. During the year, we wrote several cash-covered puts and a few covered calls. Most of them expired worthless and so the net effect was that it helped generate some income. The strategy is expected to increase income in the coming years as we use those two vehicles using a maximum of one-third of our total portfolio. The idea is to use options as a nimble way to build a bullish or bearish bias in the portfolio while generating income from a portion of the unallocated cash.
We used direct purchases of stocks to allocate around 40% of our total cash position. Our cash position is still very high at around 46% of our total portfolio value.
Our portfolio is about 3% in the green. Given that we started the year more than 3% down, our performance including the roughly 3% realized gains (includes dividends) came in at just below 9%. It underperformed most of the major indexes - S&P 500 returned around 12.5%, Dow around 11%, and the NASDAQ starred with a 16.9% return. The performance is very respectable when taking into account the fact that on the average about 50% of the portfolio value remained unallocated during the year.
Below is our portfolio as of EOY 2010:
Below is a summary of transactions during the year:
We have covered calls written against one-third of our ICICI Bank (IBN) shares (Jan 2012 55). We also have cash covered puts on Ameritrade (AMTD) shares (Feb 2011 15), Cisco (CSCO) shares (Jan 2012 20 at $2.64), Berkshire Hataway (BRK.B) shares (Jan 2012 75 at $7.15), Itron (ITRI) shares (May 2011 60 at $6.90) , Quality Systems (QSII) shares (June 2011 60 at $5.50), Noble Corporation (NE) shares (June 2011 33 at $2.62), Abbott Labs (ABT) shares (Jan 2012 45 at $4.40), Johnson & Johnson (JNJ) shares (July 2011 60 at $2.47), H&R Block (HRB) shares (Jan 2012 10 at $1.60 and Jan 2012 12.5 at $2.30), Alcoa (AA) shares (Jan 2012 15 at $1.70), and Nutrisystem (NTRI) shares (June 2011 17 at $1.30) with a cash coverage requirement of about 44% of our cash position.
We used direct purchases of stocks to allocate around 40% of our total cash position. Our cash position is still very high at around 46% of our total portfolio value.
Our portfolio is about 3% in the green. Given that we started the year more than 3% down, our performance including the roughly 3% realized gains (includes dividends) came in at just below 9%. It underperformed most of the major indexes - S&P 500 returned around 12.5%, Dow around 11%, and the NASDAQ starred with a 16.9% return. The performance is very respectable when taking into account the fact that on the average about 50% of the portfolio value remained unallocated during the year.
Below is our portfolio as of EOY 2010:
| Stock | Buy Date | Buy Price | Current Price | Current % Of Portfolio | Unrealized % Return | Yield as % of Portfolio Value |
| Altria (MO) | Various | 19.19 | 24.99 | 1.96 | 30.22 | 0.16 |
| Philip Morris International (PM) | 1/4/2005 | 32.19 | 59.69 | 1.87 | 85.42 | 0.12 |
| Kraft Foods (KFT) | Various | 26.33 | 31.93 | 2.01 | 21.28 | 0.09 |
| Pfizer (PFE) | Various | 22.13 | 17.03 | 1.87 | (23.04) | 0.09 |
| ICICI Bank (IBN) | 5/18/2006 and 08/01/2008 | 25.28 | 49.11 | 2.31 | 106.64 | 0.11 |
| Central Europe & Russia Fund (CEE) | Various | 39.23 | 41.19 | 2.26 | 5.01 | 0.01 |
| Itron Inc. (ITRI) | 11/07/2007 | 85.01 | 54.44 | 0.85 | (36.04) | None |
| iRobot (IRBT) | 12/18/2007 | 18.65 | 23.06 | 1.45 | 24.71 | None |
| LDK Solar (LDK) | 01/22/2008 | 30.49 | 10.03 | 0.47 | (67.11) | None |
| Aegon N.V. (AEG) | 04/28/2008 | 15.99 | 5.98 | 0.28 | (62.59) | 0.00 |
| Frontline Limited (FRO) | 10/06/2008 | 36.95 | 25.03 | 1.18 | (23.84) | 0.08 |
| DryShips Incorporated (DRYS) | 02/09/2009 | 6.96 | 5.96 | 0.66 | (14.42) | 0.00 |
| Plum Creek Timber (PCL) | 07/23/2009 | 30.50 | 35.59 | 2.24 | 16.69 | 0.14 |
| CPFL Energia S.A. (CPL) | 07/28/2009 | 50.45 | 73.41 | 2.31 | 45.51 | 0.18 |
| BP plc (BP) | 08/05/2009 | 51.49 | 43.25 | 1.36 | (16.00) | 0.09 |
| AT&T (T) | 08/27/2009 | 26.38 | 29.21 | 1.83 | 10.71 | 0.12 |
| Sysco Corporation (SYY) | Various | 25.92 | 29.30 | 2.30 | 13.03 | 0.10 |
| Exelon (EXC) | 12/30/2009 | 49.38 | 41.08 | 1.94 | (16.81) | 0.16 |
| Telefonica SA (TEF) | 02/09/2010 | 68.74 | 67.62 | 2.12 | (1.70) | 0.30 |
| Vonage Holdings (VG) | 04/06/2010 | 1.51 | 2.37 | 0.74 | 56.50 | 0 |
| Archer Daniels Midland (ADM) | 04/23/2010 | 28.27 | 30.03 | 1.89 | 6.21 | 0.09 |
| Intel Corporation (INTC) | Various | 21.91 | 21.46 | 2.70 | (2.06) | 0.12 |
| Google Inc. (GOOG) | 05/03/2010 | 528.36 | 590.80 | 1.86 | 11.82 | 0 |
| Cardinal Health (CAH) | 05/06/2010 | 34.42 | 38.71 | 1.82 | 12.46 | 0.06 |
| Pearson PLC (PSO) | 05/06/2010 | 14.32 | 15.85 | 1.74 | 10.66 | 0.16 |
| Nokia (NOK) | 05/14/2010 | 10.35 | 9.93 | 1.56 | (4.06) | 0.16 |
| Harris (HRS) | 06/07/2010 | 45.65 | 46.40 | 2.19 | 4.52 | 0.08 |
| Beckton Dickson (BDX) | 06/23/2010 | 70.20 | 85.21 | 2.68 | 21.38 | 0.10 |
| NYSE EuroNext (NYX) | 10/22/2010 | 30.38 | 29.85 | 1.88 | (1.74) | 0.15 |
| Owens & Minor Inc. (OMI) | 10/22/2010 | 28.11 | 29.59 | 1.86 | 5.27 | 0.08 |
| Encana (ECA) | 11/8/2010 | 29.22 | 27.93 | 1.75 | (4.33) | 0.10 |
| Cash | 46.06 | |||||
| Total Portfolio | 2.80 | 2.72 |
Below is a summary of transactions during the year:
| Stock | Buy Date | Buy Price | Sell Date | Sell Price | % Gain (Loss) | % Portfolio Return* |
| Ameritrade (AMTD) | 5/21/2008 | 17.69 | 01/19/2010 | 17.45 | (1.33) | (0.02) |
| AMTD Jan 17.5 Covered Calls (TQAAW) | 1/19/2010 | NA | 9/10/2009 | NA | NA | 0.22 |
| COST Jan 60 Covered Calls (PRQAL) | 1/19/2010 | NA | 9/10/2009 | NA | NA | 0.06 |
| IBN Mar 40 Covered Calls (ITZCN) | 1/22/2010 | NA | 10/06/2009 | NA | NA | 0.20 |
| Costco (COST) | 8/01/2009 | 62.27 | 02/09/2010 | 58.18 | (6.57) | (0.08) |
| AAV Aug 7.5 Covered Calls | 8/21/2010 | NA | 3/9/2010 | NA | NA | 0.06 |
| NTRI Sep 17.5 Puts | 9/17/2010 | NA | 4/19/2010 | NA | NA | 0.19 |
| IBN Sep 40 Calls | 9/18/2010 | NA | 3/5/2010 | NA | NA | 0.18 |
| EMR Sep 43 Puts | 9/18/2010 | NA | 6/10/2010 | NA | NA | 0.12 |
| ICICI Bank (IBN) – Called Away | 5/18/2006 | 27.54 | 9/18/2010 | 39.76 | 44.88 | 0.43 |
| VFC Nov 70 Puts | 10/18/2010 | NA | 8/21/2010 | NA | NA | 0.10 |
| Anthracite (ACPIQ formerly AHR) | 11/9/2007 | 7.99 | 10/18/2010 | (0.02) | (100.20) | (0.70) |
| Advantage Energy Fund (AAV) | Various | 3.85 | 11/8/2010 | 6.50 | 68.85 | 0.23 |
| QGEN Nov 17.5 Puts | 11/20/2010 | NA | 7/27/2010 | NA | NA | 0.11 |
| Realized Gain/(Loss) 2010 Including Dividends | - | - | - | - | - | 2.84 |
- % Gain/Loss Relative to Portfolio Value at Beginning of Year + Deposits
- The table assumes realization of profits associated with selling options only after the option is exercised or expiry.
We have covered calls written against one-third of our ICICI Bank (IBN) shares (Jan 2012 55). We also have cash covered puts on Ameritrade (AMTD) shares (Feb 2011 15), Cisco (CSCO) shares (Jan 2012 20 at $2.64), Berkshire Hataway (BRK.B) shares (Jan 2012 75 at $7.15), Itron (ITRI) shares (May 2011 60 at $6.90) , Quality Systems (QSII) shares (June 2011 60 at $5.50), Noble Corporation (NE) shares (June 2011 33 at $2.62), Abbott Labs (ABT) shares (Jan 2012 45 at $4.40), Johnson & Johnson (JNJ) shares (July 2011 60 at $2.47), H&R Block (HRB) shares (Jan 2012 10 at $1.60 and Jan 2012 12.5 at $2.30), Alcoa (AA) shares (Jan 2012 15 at $1.70), and Nutrisystem (NTRI) shares (June 2011 17 at $1.30) with a cash coverage requirement of about 44% of our cash position.
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