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A Media Portfolio for Long-Term Investors

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- I have spent a considerable portion of the last week discussing several media stocks on TheStreet. My article history contains stories that explain why I am bearish Netflix (NFLX) and Sirius XM (SIRI) and bullish Bell Canada (BCE), Rogers Communications (RCI - Get Report), Time Warner (TWX), Madison Square Garden (MSG - Get Report) and Pandora (P - Get Report).

In this article, I outline a portfolio of media stocks that could work for some long-term investors who like to speculate a little and use options frequently, but conservatively as part of a growth-and-income portfolio. These are the same types of strategies we discuss each week with subscribers in my Options Investing Newsletter. As always, use these ideas as a starting point for your own research. Your unique circumstances might warrant a different approach.

Ultimately, I hope to illustrate how to work options into your portfolio at a basic, but worthwhile and productive level. You might use different stocks or methods to achieve similar goals.

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In a portfolio like this, I want to keep a core of about 75% to 80% in dividend-paying growth stocks. In the remaining 20% to 25%, I take things in a progressively speculative direction.

Core (Initial Positions)

  • BUY 100 to 500 shares of BCE
  • BUY 100 to 500 shares of RCI
  • BUY 100 to 500 shares of TWX
  • Your amount of available capital, time horizon (when you'll be needing your money) and risk aversion dictate how much money you can put into your initial positions. Ideally, I strive to write covered calls against each position. Your broker's commission structure influences whether or not it makes sense to execute covered calls.

  • >>Also see: Why I Am Long Time Warner
  • Additionally, you might set different strike prices or choose different expiration months on the basis of your near- and long-term sentiment. In addition, you'll have to factor in the risk that your shares could be called away and decide on a level of risk that's appropriate for you. As of Tuesday's close, with all three stocks up sharply, I would consider proceeding as follows:

    Write the TWX May $30 calls

    I would prefer to take the same approach with BCE and RCI, but with liquidity and the availability of strike prices a bit of an issue, I would refrain. Instead, as a potential alternative to buying BCE and RCI stock outright and directly, I would consider getting long via writing cash-secured puts on each name. I presently own BCE shares, but I am also short a BCE May $40 put.

  • >>Also see: Why I Am Long Rogers and Bell
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    SYM TRADE IT LAST %CHG
    MSG $82.42 0.00%
    P $17.49 0.00%
    RCI $33.98 0.00%
    AAPL $124.75 0.00%
    FB $80.78 0.00%

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