Cabot Investors Conference 2013www.cabot.net Alternatives to Bonds for Safe Income Robin Carpenter, Moderator Chloe Lutts Jensen Roy Ward, Jacob Mintz.

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Presentation transcript:

Cabot Investors Conference 2013www.cabot.net Alternatives to Bonds for Safe Income Robin Carpenter, Moderator Chloe Lutts Jensen Roy Ward, Jacob Mintz

Cabot Investors Conference 2013www.cabot.net Why Seek Alternatives? Bond Yields Are Down by Half 10-Year T-Note Index

Cabot Investors Conference 2013www.cabot.net The Current Income Menu Treasury Bonds Municipal Bonds Investment Grade Corporates High-Yield Corporates (so-called “Junk”) Preferred Stock Common Stock MLPs & REITs Buy-Write (Options) Annuities

Cabot Investors Conference 2013www.cabot.net Income Risk Issues Safety of principal Volatility Appreciation Accessibility Call-ability Reinvestment rates Taxes Inflation

Cabot Investors Conference 2013www.cabot.net A Value Screen with Yield Current ratio greater than or equal to 1.5 Long-term debt/working capital greater than 0% and less than 110% Earnings per share positive for each of the last 5 years Indicated dividend positive for coming year Dividend maintained over the last 12 months 12-month EPS greater than EPS five years ago Price/book ratio less than or equal to 1.2 P/E among the lowest 10% of the universe Yield (June) = 5%, 10-Year Return = 15%, YTD = -5%

Cabot Investors Conference 2013www.cabot.net Potential Characteristics of Income Investments Low- or High-Yielding Unlikely to Lose Value Capital Appreciation Potential Dividend Growth – Another Story

Cabot Investors Conference 2013www.cabot.net Potential Characteristics of Income Investments

Cabot Investors Conference 2013www.cabot.net Treasuries, Investment-Grade Bonds & Funds

Cabot Investors Conference 2013www.cabot.net Treasuries, Investment-Grade Bonds & Funds High-Yield Bonds

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks Treasuries, Investment-Grade Bonds & Funds

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Treasuries, Investment-Grade Bonds & Funds

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Treasuries, Investment-Grade Bonds & Funds

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Dividend Stocks Treasuries, Investment-Grade Bonds & Funds

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Safety-First Stocks, Utilities Treasuries, Investment-Grade Bonds & Funds

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Blue Chips Treasuries, Investment-Grade Bonds & Funds Safe Stocks, Utilities

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Dividend-Paying Growth Stocks Treasuries, Investment-Grade Bonds & Funds Safe Stocks, Utilities Blue Chips

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Energy Stocks Treasuries, Investment-Grade Bonds & Funds Safe Stocks, Utilities Blue Chips Growth Stocks

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Telecoms, Insurance, Utilities Treasuries, Investment-Grade Bonds & Funds Safe Stocks, Utilities Blue Chips Energy Stocks Growth Stocks

Cabot Investors Conference 2013www.cabot.net High-Yield Bonds Preferred Stocks MLPs & REITs Treasuries, Investment-Grade Bonds & Funds Safe Stocks, Utilities Blue Chips Energy Stocks Telcos, Insurance, Utilities Growth Stocks

Cabot Investors Conference 2013www.cabot.net ETFs for Income SPDR S&P Dividend ETF (SDY) iShares MSCI USA Minimum Volatility (USMV)

Cabot Investors Conference 2013www.cabot.net Buy Writes/Covered Calls A Buy Write or Covered Call consists of Buying or Owning a Stock and Selling (i.e., shorting) a Call Option on that Stock

Cabot Investors Conference 2013www.cabot.net QQQ Buy 100 Shares of the QQQ at $76.00 This is a capital outlay of $7600 Sell 1 September 76 Call for $2.00 or $200

Cabot Investors Conference 2013www.cabot.net Profit and Loss Graph

Cabot Investors Conference 2013www.cabot.net Yield at September Expiration Stock at $76 or above, we have created a Yield of 2.6% We do this 12 times a year, we have created a Yield of 31.2%

Cabot Investors Conference 2013www.cabot.net NFLX Buy 100 Shares of NFLX at $250 This is a capital outlay of $25,000 Sell 1 September 250 Call for $16 or $1600

Cabot Investors Conference 2013www.cabot.net Profit and Loss Graph

Cabot Investors Conference 2013www.cabot.net Yield at September Expiration Stock at $250 or above, we have created a Yield of 6.4% We do this 12 times a year, we have created a Yield of 76.8%

Cabot Investors Conference 2013www.cabot.net

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