"We are clearly in the later stages of a bull market with the [S&P 500 index] trading at 17 to 18 times earnings," Sass said. "At the same time you have interest rate risk due to a potential Fed action. In that type of environment, a covered-call, or buy-write, strategy not only offers downside protection from increasing volatility in the market, but also income generation in a fairly rich market."
The M.D. Sass Equity Income Plus Fund (MDEPX) is unique in that it actively selects the stocks in its portfolio as opposed to simply employing a buy-write strategy on the S&P 500 index.
The fund, which is up 3.3% so far in 2015, also buys put protection on the S&P 500 index to provide extra downside protection.
Sass says the put premium offers cheap insurance given that the VIX, or so-called fear index, is at low levels, in the 12-13 range.
"The cardboard box industry is an oligopoly, and that's a good place to invest opposed to a highly fragmented industry," says Sass. "Rock-Tenn is merging with MeadWestvaco (MWV) , and we think the cost synergy targets they gave out are way too low."
Sass says he can sell at-the-money calls on both Rock-Tenn and International Paper and garner annual returns of 13%-14%, respectively, even if the stocks don't move.
"There is a misperception that all forms of traditional advertising are going away, and we have obviously seen declines in newspapers and even TV," says Sass. "But outdoor advertising is a different beast. The fact that Apple (AAPL) - Get Report is using billboards tells you something."