Concentrated Stock

CONCENTRATED STOCK

Concentrate to Build Wealth. Diversify to Preserve It.

BakerAvenue employs a multi-disciplinary approach that strives to optimize the value of concentrated stock positions. We encompass solutions for strategic diversification, hedging, income generation, and tax minimization. Through a synthesis of Technical, Macro, and Fundamental disciplines, we guide clients through the complexity of unwinding a concentrated stock position while simultaneously working towards maximizing its potential value.

Additionally, view executive compensation strategies to diversify and reduce tax exposure. We offer deep expertise in concentrated stock positions or highly appreciated assets, Incentive Stock Options (ISOs) and Alternative Minimum Tax (AMT), Alternative Investments, and helping you to prepare for when your company is pre- or post- IPO.

BakerAvenue Concentrated Stock Management Services

Diversification and Monetization

Lifestyle: A portfolio mix to produce disposable income and growth to protect purchasing power. These assets have moderate risk and return goals.

Dividend-paying stocks
High-quality stocks
Taxable / Municipal bonds
Income-producing real estate

Growth: A portfolio mix to maximize returns, often with much higher risk tolerance and volatility, that could have higher turnover and less tax efficiency.

Momentum and growth stocks
Emerging markets
Alternative investments: Private equity, venture capital

Legacy: A portfolio mix to pass on to future generations or beneficiaries. The goal is to protect the purchasing power of the underlying assets, but not necessarily to produce the highest return possible.

Growth equities
Real Estate
Bonds
Natural resources / commodities
Absolute return strategies

Tax-Reduction Strategies

Objectives:

Strategically maximize tax implications for your concentrated stock
Ensure maximum tax benefit is taken for philanthropic giving

Process:

A review of your prior year’s tax returns to build a comprehensive tax picture
Evaluate all of your stock compensation awards to ensure that going forward, diversification is achieved in a tax-optimized manner with particular regard to Same Day Sale vs. Exercise and Hold decisions—when to exercise and maximize long-term capital gains rates
Forensically track all AMT (Alternative Minimum Tax) that is incurred to ensure timely recovery of AMT credits in subsequent years.

Tax-Loss Harvesting:

A process that can be done with any type of capital investment at any time of the year.

Potential Solutions:

Understand the benefits of a Charitable Remainder Trust (CRT) solution to defer taxes on stock diversification strategy. Benefits include: upfront tax deductions on the charitable donation component providing a platform to favor charitable causes and significantly deferring capital gains taxes.
Use lifetime gifting strategies that use today’s historically high Unified Estate and Gift Tax Exemption amount ($11.70 million/per person) to avoid Gift Tax and Estate Tax, and integrate income and capital gains tax planning into your overall estate plan.
Proactively anticipate the impact of proposed tax changes of the new administration in order to optimize tax reduction strategies.

Gifting and Philanthropy

Charitable giving enables you to diversify concentrated stock positions and manage taxes while supporting causes you care about.

Generating Income

While traditional hedging approaches employ a static “hedge-it-and-forget-it” mentality, we believe in an active approach to optimize the value of the concentrated stock position.

We aim to hedge concentrated stock positions when fundamental and technical trends are weak but may remove hedges when fundamental and technical trends are strong, allowing the position to potentially gain in value.
This strategy is a more opportunistic approach that lowers hedging costs and enhances potential returns.
We use options strategies to create income from concentrated positions to safeguard the positions against substantial loss.

Hedging & Reducing Risk

Leverage options strategies to create income from concentrated positions to safeguard the positions against substantial loss.

Overview

Collars offer minimum price level for sale (put) while retaining upside exposure to call strike (call) mitigation levels
Flexibility to select call and put strike prices to achieve desired payoffs and risk

Potential Benefits