Today, 8/24/10 I sold 2 ACAS Nov10 6 Covered Calls for a net deposit of $28.47 in an IRA account.  My basis for these ACAS shares is now 23.13, excluding dividends received.  This transaction represents a simple return of .61% and an annualized return of 2.56% on my basis.

Thomson Reuters rates ACAS as Outperform on 8/22/10 while S&P has a 12 month price target of 7.00 and a Hold rating.  Market Edge Second Opinion has a price opinion of 5.01 and also has a Hold rating on the stock.

The market has not been kind to ACAS since mid-2008, for good reason.  As recently as March 2010, the ACAS auditors (Ernst & Young) had included in the audit report an explanatory paragraph regarding ACAS ability to continue as a going concern.  On June 30, 2010, E&Y issued an amendment statement the going concern issue no longer exists.  What changed?  Well, the company was able to complete a major restructuring of its unsecured borrowing arrangements and is no longer in default.

I read through much of the quarterly and annual returns last night and feel a little more encouraged about the future of ACAS.  Now if the stock price would just improve I would feel even better yet.  However, as my strike price and the analysts suggest, I suspect that it will be a little while yet before the stock price substantially improves.

ACAS does not currently pay a cash dividend.  As a regulated investment company, ACAS is required to pay some level of dividends to retain that status under the IRS code.  Or that is how I understand it.  Apparently ACAS is limited to paying dividends with capital stock and only as much as necessary to maintain it status as a regulated investment company.  My last dividend payment was part cash and part stock.

On Wednesday, 4/7/10, I sold 2 ACAS Aug10 7.50 Covered Calls for a net deposit of $38.46 in an IRA account.  My basis for these ACAS shares is now 23.27, excluding dividends received.

I’ve been sitting on these ACAS shares since my last Calls expired worthless in Aug09.  ACAS has had some financing difficulties and even some concern about them being able to continue in business.  Recently they were able to announce an extension of a credit line lock up agreement to May 31, 2010.  That is not too far away but does suggest that things are not as bad as they once were.

I can’t find the reference right now but I believe there have been some attempts to buy out ACAS.  The offer was refused.  I don’t remember seeing any other references regarding a buy out.

ACAS share price has been generally trending upward for the past year, with the usual pull backs from time to time.  It has been trending upward pretty consistently for the past two months and is trading at 5.62 as I write this.  I really don’t know what to expect going forward but suspect that the 7.50 strike in August will probably allow these current Calls to expire worthless.

ACAS has not paid a dividend since Aug09.  The dividend at that time was $1.07 per share.  However, the dividend was prorated between a cash payment .19 and additional shares at .88.  The result for me is that I received an additional 54.9586 shares of ACAS.  I continue to hold those new shares although I can’t say why at the moment.  It could be that I just forgot about them because I had to do some research just now to understand why I had two dividend entries back in August.  Now that I know again I need to think about what to do with them.  I should either sell them or buy 46 more so I can sell Covered Calls on them also.  Certainly I should sell the fractional share.

On 8/31/09, I sold 2 ACAS Jan10 5 Covered Calls for a net deposit of $18.49 in an IRA account.  My basis for these ACAS shares is now 23.46, excluding dividends received.

At this point, ACAS is a pure speculative play for me.  If (did I say if..I mean when) the economy revives ACAS should do okay.  Otherwise, I may lose it all or just bump along down here picking up some option premium about twice a year and an occasional dividend.  Speaking of dividends, the last one paid in early August.  It was valued at $1.07 per share and was split between cash and additional stock.  I received 37.04 in cash and 176.96 in additional stock.  I keep meaning to sell the extra stock but just haven’t gotten around to it yet.