Bill Gates invests through a vehicle called Cascade Investment Holdings. On the blog today, we thought it might be interesting to look at the investment fund’s top held equities and a potential covered call investment strategy involving them.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_10_09_Gates.mp3
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OK, we admit this isn’t the most complex and deeply thought out investment strategy ever to grace the ones and zeros of cyberspace. But it is easy, kind of interesting as a curiosity, and it illustrates how small investors can identify the best option trades to exploit the numerous market inefficiencies they can, through their own research, identify.
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The Stocks in Gate’s Portfolio:
Canadian National Railway (CNI) – As the name implies, Canadian National Railway provides rail service in Canada and in the northern United States. It might be the company’s below average P/E or its nearly 25% return on equity drawing Bill Gates to the stock. In any event, we’ll take a look at covered calls on the stock in the coming months.
Republic Services INC (RSG) – This solid waste collection and disposal company is based in FT Lauderdale Florida. The fundamentals on the stock look fairly decent. It has around a 9% sales growth rate with nearly 24% quarterly profit growth. The company is about 1/5th the size of Waste Management (WMI) and has a P/E around the industry average.
Televisa S.A. (TV) – This Mexican media outlet posts 12% sales growth and a nearly 25% profit margin. Televisa is not to be confused with Telefonos de Mexico (TMX), the previously state owned telephone company acquired in the 90’s by Carlos Slim (Currently the world’s richest man).
Bershire Hathaway (BRK-A) – This is, of course, the famous investment vehicle of the noted investment guru Warren Buffet. If the stock did offer options (it doesn’t), at $125,000 a share it would take around 10 to 12 million to enter into a covered call position. We will therefore, confine our search to the first three stocks. A more affordable option, for those wishing to invest in Berkshire, is the class B shares (BRK-B) which trade for around $4,100.
PowerShares Exchange Traded Fund (PRFF) – Over 5% of this ETF’s holdings are in Berkshire Hathaway B. This may not be a perfect match, but here you can own at least a microscopic slice of the Berkshire Hathaway pie. Unfortunately, this particular ETF does not offer options. Gate’s fund does not have any holdings in the PowerShares ETF.
Potential Trades:
Using PowerOptions‘ search engine, we ran a quick covered call search for the CNI, RSG and TV stocks. Below are some of the results we came up with.
| Covered Call Search | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Symbol | Stock Price |
OPTION | Strike Info |
Option Bid |
Net Debit |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
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| RSG | 33.17 (-0.50) | RSGAG | 08 JAN 35.0 (101) | 0.9 | 32.27 | 2.7 | 2.8 | 8.5 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CNI | 54.78 (-0.91) | CNIAK | 08 JAN 55.0 (101) | 3.1 | 51.68 | 5.7 | 6 | 6.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TV | 25.83 (+0.19) | TVAE | 08 JAN 25.0 (101) | 2.3 | 23.53 | 8.9 | 6.2 | 6.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CNI | 54.78 (-0.91) | CNIKK | 07 NOV 55.0 (38) | 1.95 | 52.83 | 3.6 | 3.7 | 4.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TV | 25.83 (+0.19) | TVKE | 07 NOV 25.0 (38) | 1.6 | 24.23 | 6.2 | 3.2 | 3.2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TV | 25.83 (+0.19) | TVAX | 08 JAN 22.5 (101) | 4 | 21.83 | 15.5 | 3.1 | 3.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CNI | 54.78 (-0.91) | CNIAJ | 08 JAN 50.0 (101) | 6.3 | 48.48 | 11.5 | 3.1 | 3.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Competitors:
Competitors for RSG include: Allied Waste Industries Inc. (AW), Waste Industries USA Inc. (WWIN), Waste Management, Inc. (WMI), Casella Waste Sys. Inc. (CWST), and Waste Connections Inc. (WCN).
Competitors for CNI include: Canadian Pacific Railway Limited (CP), Norfolk Southern Corp. (NSC), Union Pacific Corp. (UNP), Burlington Northern Santa Fe Corp. (BNI), Kirby Corp. (KEX), and Kansas City Southern Indus. Inc. (KSU).
Competitors for TV include: Cisneros Group of Companies (private), Telemundo Communications Group, Inc. (private), TV Azteca, S.A. de C.V. (private), and Entravision Comm. Class A (EVC).
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
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[tags] Cisneros Group of Companies, Telemundo Communications Group, Inc., TV Azteca, S.A. de C.V., AW, Allied Waste Indus. Inc., BNI, Burlington Northern Santa Fe Corp., CNI, Canadian National Railway Co., CP, Canadian Pacific Railway Ltd., CWST, Casella Waste Sys. Inc., EVC, Entravision Comm. Class A, KEX, Kirby Corp., KSU, Kansas City Southern Indus. Inc., NSC, Norfolk Southern Corp., RSG, Republic Services Inc. Class A, TMX, Telefonos De Mexico SA, TV, Grupo Televisa S.A. ADR, UNP, Union Pacific Corp., WCN, Waste Connections Inc., WMI, Waste Management Inc., covered call investment strategy, investment strategy, poweroptions [/tags]