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 CIBC Private Wealth, Wood Gundy  CIBC Private Wealth, Wood Gundy

Richard Lapointe Investment Group

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Our strategy

Address 600, boul. de Maisonneuve Ouest Bureau 3050 Montreal QC, H3A 3J2
Telephone Number (514) 847-6324
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Our strategy

Combining ideas from Warren Buffet and Peter Lynch's value investing, we focus on buying into companies that are BIG, SAFE, CHEAP, and pay a DIVIDEND.

BIG: To avoid speculating on smaller companies whose stock prices can fluctuate vastly (2-5%) on a daily basis, we look for big players (min. $1 billion market cap) and industry leaders that should be around for many years to come.

SAFE: Although no stock is 100% safe, we look for companies with relatively encouraging track records, that have grown at a steady pace, and have healthy balance sheets. We are specifically drawn to names that show strong earnings and cash flow while controlling a manageable level of debt.

CHEAP: An important principle in value investing is to buy companies that have had stock price declines and appear undervalued while holding off on names, regardless of market buzz and positive results, if they are considered expensive. Since entry timing cannot always be perfect, we look to buy companies at a lower price (10% - 15% below annual high) that are primed to rebound.

DIVIDEND PAYER: The value of dividends is critical to any investor seeking additional overall returns and a steady stream of income to supplement their salary or pension. As has been the case over time, total portfolio returns on equity portfolios that include dividend-paying stocks dwarf the returns of the TSX and of dividend non-payers COMBINED.

 
 

Covered Calls

An example of covered call writing looks something like this. We buy 1000 shares of XYZ Corp at 20 bucks a share. Twenty thousand dollars invested. Now, a call write, means that a client enters into an agreement with an options trader in which over the next five months, this is a five month example, the client may not sell his shares. If in that five month time, the option trader who bought the option decides he wants to take the stock away from you at twenty two. He can. You will be forced to sell the shares at twenty two. For that privilege, the client receives a premium. In this case ninety two cents per share, or nine hundred and twenty dollars. That is given upfront, and you are guaranteed to keep it. Whether the stock goes up or down. If you add that 920 to the dividend of $75 you get $995 or 4.98% for five months. This is made whether the stock market goes up or down. This is a guaranteed yield over the five months. Should the stock climb excessively above 22 close to 23, 24, 25, you can be assured you will receive a knock on your door. The option trader will buy the shares away from you at 22. In this case, you will make $2 a share more. Thus, you will make $2995 over the five months, which is 14.98%. This is not an annualized rate of return, that's the rate of return you're going to make if the stock goes up. The downside to this example is this. That stock can go to a $100 a share. You would be forced to sell it at 22. We believe that that extra stream of income over time. More than makes up for any money we leave on the table.

Covered Calls

An example of covered call writing looks something like this. We buy 1000 shares of XYZ Corp at 20 bucks a share. Twenty thousand dollars invested. Now, a call write, means that a client enters into an agreement with an options trader in which over the next five months, this is a five month example, the client may not sell his shares. If in that five month time, the option trader who bought the option decides he wants to take the stock away from you at twenty two. He can. You will be forced to sell the shares at twenty two. For that privilege, the client receives a premium. In this case ninety two cents per share, or nine hundred and twenty dollars. That is given upfront, and you are guaranteed to keep it. Whether the stock goes up or down. If you add that 920 to the dividend of $75 you get $995 or 4.98% for five months. This is made whether the stock market goes up or down. This is a guaranteed yield over the five months. Should the stock climb excessively above 22 close to 23, 24, 25, you can be assured you will receive a knock on your door. The option trader will buy the shares away from you at 22. In this case, you will make $2 a share more. Thus, you will make $2995 over the five months, which is 14.98%. This is not an annualized rate of return, that's the rate of return you're going to make if the stock goes up. The downside to this example is this. That stock can go to a $100 a share. You would be forced to sell it at 22. We believe that that extra stream of income over time. More than makes up for any money we leave on the table.

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Examples

Example 1

In August

 

In January

 

Buy 1000 shares of Company X at $21.16

$21,160

Options assigned (sell 1000 shares) at $23.00

$23,000

Sell 10 Jan. $23 call options at $0.92

$920

 

 

Dividends for five months

$75

 

 

Total Yield (Call premium + Dividends) = $995 or 4.7% in five months

Total Rate of Return (Yield + Capital Gains) = $2,835 or 13.4% in five months

Example 2

In August   In December  
Buy 500 shares of Company Y at $24.05 $12,025 Options assigned (sell 500 shares) at $26.00 $13,000
Sell 5 Dec. $26 call options at $0.88 $440    
Dividends for four months  $125    

Total Yield (Call premium + Dividends) = $565 or 4.7% in four months

Total Rate of Return (Yield + Capital Gains) = $1,540 or 12.81% in four months

Example 3

In August   In February  
Buy 200 shares of Company Z at $78.02 $15,550 Options assigned (sell 200 shares) at $85.00 $17,000
Sell 2 Feb. $85 call options at $1.33 $266    
Dividends for six months  $200    

Total Yield (Call premium + Dividends) = $466 or 3% in six months

Total Rate of Return (Yield + Capital Gains) = $1,916 or 12.32% in six months

 

These calculations and projections are for demonstration purposes only. They are based on a number of assumptions and consequently actual results may differ, possibly to a material degree.

 
 
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