Covered Call

The objective of Chartwell’s Covered Call portfolio is to provide superior returns in flat or down equity markets while earning market-like returns in rising equity markets. We believe combining a portfolio of higher dividend paying stocks emphasizing dividend growth, reasonable valuations, and compelling fundamentals with a disciplined call overwriting strategy will deliver superior risk adjusted returns over a market cycle.

• Portfolio Benefits: The portfolio offers a lower volatility total return solution for clients seeking equity exposure with a robust and increasing level of dividends. When combined with a flexible covered call program, portfolio volatility should be further reduced and downside protection enhanced.
  
  
• Investment Process: Our investment team targets its research on dividend paying companies traded on US exchanges with market capitalizations exceeding $1 billion. Within this universe, securities that are candidates for purchase generally have dividend yields higher than the market, strong or improving fundamentals and are not over-valued by the marketplace.  In addition, emphasis is given to stocks that are growing their dividends.
  
  Our team of research specialists provides research designed to highlight the attractiveness of each company's fundamentals and valuation. Companies that have expressed the desire to grow their future dividend payout are analyzed for their capacity to do so. At the same time, valuations must be sensible relative to that company’s underlying fundamental characteristics. All told, we arrive at a portfolio of stocks that offer the best combination of 1) current yield, 2) the prospect for growth in both dividends and earnings and 3) a compelling valuation. We attempt to avoid situations where fundamentals are fully discounted or where our research indicates that a reduction or elimination of the dividend payment is likely.
  
  Our covered call overwriting program is designed to be additive to returns in many markets while mitigating downside risk and lowering volatility. The program is both tactical and flexible in its use of covered call writing but will generally use out-of-the money call options on all or a portion of the portfolio.
  
  
• Portfolio Construction: The portfolio is the result of a 'bottom-up' selection process which reflects several overarching portfolio yield and diversification considerations. It is constructed to offer diversification by economic sector. No single position can be greater than 5% of the portfolio. Economic sector weights are generally limited to no more than 5 percentage points above the sector weight of the S&P 500. All securities must be traded on a US exchange.

*5 year relative to the S&P 500 Index
Statistics as of 12/31/16

Investment Team

Jeffrey D. Bilsky, MBA
Portfolio Analyst
11 years of experience

Stephen M. Elliker, MBA
Senior Portfolio Analyst
13 years of experience

Douglas W. Kugler, CFA
Senior Portfolio Manager
19 years of experience

Gretchen Regan, CFA
Quantitative Analyst
14 years of experience

Peter M. Schofield, CFA 
Senior Portfolio Manager
31 years of experience