Summer vacations is here. It is time to get away from work and
relax a little bit.
Well, relax may have been what you did before you had kids,
now vacation is more exciting than it used to be. You can relax
when you get back to work. Now it's all the kids and you in the
car on a road trip to see some amusement parks.
It's not just you though; your money can also get some action at
theme parks. Sure, you've always had the option to buy theme
parks in one way or another with Disney, Universal, Busch
Gardens, Six Flags or Cedar Lane. One classic theme park that may
be new to investors is Seaworld Entertainment (
). Created in April 2013 when InBev split Busch's beer and
entertainment divisions, Blackstone bought the theme parks and
built one of the largest operators of regional theme parks in the
world out of Sea World, Busch Gardens, and Sesame Place.
Seaworld had revenues of $1.4 billion, which seems like a lot
of money until you remember you have to feed 86,000 animals every
day. Given what a whale eats, they were able to feed it and still
make profits of $0.57 per share in 2013. Given the extra focus on
profits, operations have been improving under CEO Jim Atchison,
with earnings expected to rise to about 1.41 this year. The
company is paying a 2.88% dividend yield.
If an investor buys Sea World (
) for $28.66, they could sell a September 30 call for $0.95. That
would give the position 3.3% of downside protection and an 8.3%
simple assigned rate. If you annualize that over the 72 days this
position is open, that is a 41.6% return (for comparison purposed
only). In order to be assigned the stock would need to appreciate
about 4.6% and if the stock stays at the current price the
covered call would add 3.3% simple return to the stock. A covered
call steadies out the returns on a stock, taking some of the
excitement and downside away from it, but as with any stock there
is always potential for a big drop. These calculations do
not include commissions or account for changing market conditions
that might happen by the time you read this. It would be really
cool to tell the kids you owned a piece of Shamu though.