Chris Lackey is a former mutual fund adviser, now enrolled in an MBA program.
Chris Lackey
Occupation
Former mutual fund adviser, now enrolled in a Master of Business Administration (MBA) program
The portfolio
Includes shares in Royal Bank of Canada, Great-West Lifeco Inc., Brookfield Asset Management Inc., Jean Coutu Group Inc., Twin Butte Energy Ltd., Bank of America Corp. and Apple Inc.; low-cost index funds such as the iShares DEX Universe Bond Index Fund.
The investor
Chris Lackey worked for several years in the financial sector, many of them with mutual fund companies. While in the industry, he discovered Garth Turner's Greater Fool blog and his eyes "were opened for the first time to things like preferred shares, REITs and low-cost index funds."
"That was when I got really into investing," he adds. "I did several courses at the Canadian Securities Institute, read a lot of books and started my MBA."
How he invests
Mr. Lackey likes to invest in larger capitalization companies that "fall out of favour but have good, stable earnings and … dividends." Call and put options usually trade on their stocks, which opens the door to "conservative options strategies."
A call (or put) option gives the buyer the right to buy (or sell) stock at a specified "strike" price within a certain period.
One of the option strategies he uses is "covered calls." It involves selling call options against his stocks. The sales generate income, augmenting the yields on his dividends. If a stock rises, he also earns a capital gain – up to the price where the option holder can exercise their right to buy shares. Put options can also be used to hedge gains. A good time to do this may be when a stock has had a quick run-up and is overbought.
A recent trade he made uses options to both hedge and generate income. In late February, Mr. Lackey bought Canadian Western Bank at $20 a share in a registered account. The price quickly shot up 10 per cent. To protect this gain and earn income, he bought a put with a strike price of $22 and sold a call with a strike price of $22 (the premium on the call was higher than on the put, generating income).
Best move
"My best move has been sticking with Brookfield Asset Management. I've been invested in it the longest. Patience has been rewarded."
Worst move
"It was Twin Butte Energy Ltd. I started accumulating the stock at $2.50 because I saw it in a value fund and it had gone from 50 cents to $5 after the 2008 financial crisis … [it now trades for pennies]."
Advice
"Nobody cares about your money as much as you do …. Doing your homework gives you the fortitude to go against the crowd."
Want to be in Me and My Money? Contact Larry MacDonald at mccolumn@yahoo.com or his website