The foundation of this approach is a structured portfolio of 33-37 carefully selected individual U.S. small company stocks along with an allocation to a passive ETF representing the Russell 2000®Index. In investing in individual stocks, our emphasis is on fundamental quality, strong profitability, low debt levels and proven management. As a way to reduce risk and generate income, we write covered call options against the small company ETF position. While this strategy reduces upside potential in very strong markets, it brings in immediate cash and typically reduces portfolio volatility. At times, the strategy may use some of the premiums generated by option writing to finance periodic put protection to cushion the portfolio during market drawdowns.
Our search begins with in-house database screening which narrows our field of focus. The results are utilized to guide our bottom-up, company level research that combines research conferences, meetings with management, third-party research and company filings. These efforts result in a proprietary return analysis and report.