The Waning Days of Summer
Earnings season is about over. And the end of the summer is upon us.
This is a weird time of year for the market. Investors tend to pay less attention because many of them are focused on trying to squeeze in the last bit of summer fun and laxness before it slips away. The market tends to do whatever it was doing before people stopped paying attention.
It was going sideways, and that is what it will likely continue to do for the next several weeks. Of course, a major headline could certainly change that. But most often these waning days of summer tend to be less eventful.
However, things can change fast when sobered up and refocused investors take a fresh look at everything after Labor Day. They tend to be in a cranky mood because the summer is over. That’s a big reason why September has been the worst month of the year for markets.
Sure, there could be some September volatility. But unless the main narratives regarding inflation, the Fed, or the economy change, the market should regain its footing. Energy prices have been rising. Technology stocks have been reinvigorated. We’ll see if that narrative continues in the next leg of the market this fall.
I’m holding off on selling calls in this update. But several stocks a near a range where calls are advantageous including Hess Corporation (HES), and possibly AbbVie Inc. (ABBV), and the Williams Companies (WMB). Keep an eye out for “Trade Alerts” in your email.
Past Month Activity
July 18th
Purchased Digital Realty Trust, Inc. (DLR) - $117.31
Intel Corp. (INTC) - Rating change “HOLD” to “BUY”
Qualcomm (QCOM) - Rating change “HOLD” to “BUY”
July 21st
BIPC July 21st $45 calls – Expired
Brookfield Infrastructure Corp. stock (BIPC) – Called
July 25th
Purchased AbbVie Inc. (ABBV) - $141.63
Sold OKE Sep 15th $65 calls at $3.20
August 8th
Sold Star Bulk Carriers Corp. (SBLK)
Portfolio Recap
AbbVie Inc. (ABBV)
Yield: 3.9%
ABBV has been in an uptrend for the last month, although it has leveled off more recently. The company reported earnings that beat on both earnings and revenue and raised guidance for the year. Humira sales were down less than expected and AbbVie’s replacement immunology drugs did better than expected. The report emboldens the notion that the revenue drop from the Humira patent expiration will be very temporary and AbbVie will turn the corner sooner than expected. BUY
Digital Realty Trust (DLR)
Yield: 4.1%
Digital reported better-than-expected earnings because of strong data center demand and solid growth. Even more importantly, the company assuaged fears that had driven the stock price down earlier this year by executing capital recycling plans that raised over $2 billion by selling joint venture assets. The move strengthens the balance sheet and secures the dividend. Now the REIT is poised to benefit from accelerating data center demand growth prompted by the AI craze. DLR has leveled off since the earnings spike, but so has the overall market. BUY
Global Ship Lease, Inc. (GSL)
Yield: 7.4%
The container shipping company reported earnings that beat estimates with revenue growth of 4.9% and earnings per share growth of 14.8% from last year’s quarter. The company posted good results despite tougher comparisons after greatly expanding its fleet two years ago. The company still has higher than current market rates under long-term contracts and the ships chartered at new rates have higher rates than existed pre-covid. GSL has pulled back below the 20 per share level for the first time since early July ahead of Friday’s options expiration. HOLD
Hess Corporation (HES)
Yield: 1.1%
Oil prices have moved higher for the last six weeks and so has HES. The exploration and production company stock moved to within just a few percent of the 52-week high. It did report earnings that beat expectations as higher production offset lower realized oil and gas prices. But energy stocks have been moving higher as oil prices are on the rise because of strong demand and limited supply. Hess’s strong margins give it strong leverage in a rising energy price environment. We’ll see how much further this uptrend can take the stock. BUY
Intel Corp, (INTC)
Yield: 1.4%
The chipmaker reported earnings that beat estimates and the company returned to profitability. The PC market appears to have bottomed out and is poised for a possible second-half recovery as Intel is also increasing its market share. Shares had initially soared, but the stock has since lost almost all of the gains as any euphoria wore off, at least for now. Intel does still have a promising future as it has invested heavily in chips in high-growth areas and insiders have been buying heavily into the stock. BUY
NextEra Energy, Inc. (NEE)
Yield: 2.7%
The weakness continues. This combination regulated and clean energy utility stock just hit a new 52-week low. The utility sector remains under pressure even in the broadening market rally as interest rates have risen and growth plays continue to be favored. But the operational performance is solid. The utility grew earnings 8.6% in the second quarter and 11% in the first half versus the same periods last year. It also has predictably solid earnings going forward because of a considerable project backlog. BUY
ONEOK, Inc. (OKE)
Yield: 5.8%
The midstream energy company reported earnings last week that beat on EPS and missed on revenue. ONEOK also raised earnings guidance for the year. The stock had nice upside after the report after pulling back for two weeks prior as the overall market weakened. We’ll see if OKE can salvage the upside rally from here. Longer term, the stock looks solid as the company is expected to grow revenue by an average of 10% per year over the next three years. HOLD
Realty Income Corp. (O)
Yield: 5.2%
This legendary monthly income stock reported earnings that slightly beat estimates. It also revealed a stellar 99% occupancy rate for its properties and an additional $3.1 billion invested in the quarter in 710 properties. The REIT has been solid, but this market is not rewarding solid at this point. O currently sells well below the pre-pandemic high, despite having higher earnings. But income and safety will come back into vogue eventually. BUY
Qualcomm Corp. (QCOM)
Yield 2.6%
Qualcomm reported earnings results last week that the market hated, and the stock has fallen over 10% since the report. Earnings were mixed with revenues missing forecasts and earnings beating. But earnings were down 37% year over year and revenues fell 23%. It’s because of lower smartphone sales as the 5G upgrade cycle ended and economic conditions tightened. Handset chip sales were down 25%. Sales are expected to remain bleak for the rest of 2023.
However, smartphone sales may be close to bottom as they are expected to increase in 2024, and Qualcomm is expected to resume earnings and revenue growth. This slump was expected and that’s why QCOM has underperformed. But it is cheap now at 13 times earnings and this lull in the cycle will certainly end at some point. BUY
Visa Inc. (V)
Yield: 0.8%
V loves the still-strong economy and increasing soft-landing odds. Consumer spending remains strong, and the company reported another impressive quarter. The stock has pulled back after soaring to a 52-week high. But that was expected and why a covered call was sold when V was higher. This is a fantastic stock to own in the longer term, and in the near term we can exploit its range and generate a high income. HOLD
The Williams Companies, Inc. (WMB)
Yield: 5.1%
The midstream energy company reported earnings that surpassed estimates and the stock got a further boost on the news. Volumes of throughput were solidly higher, and earnings grew 8%. That’s a far cry from the 30% plus earnings growth of last quarter, but this lull in acquisitions coming online was expected. It’s solid growth under the circumstances. Also, recent expansion and acquisition activity bodes well for growth in 2023 and 2024 beyond what was expected. The stock is now up over 20% since the end of May and is within 2% of the 52-week high. BUY
Existing Call Trades
V August 18th $235 calls at $9.00 - Expiring
Expiration is on Friday and V is currently selling over 7 per share over the strike price (242.75 versus 235). It seems more likely than not that the shares will be called, but that is no guarantee. The shares are currently selling 3.3% above strike and can easily lose that much in a few days if the market sells off or there is bad news for the company. But either way, we will generate a solid income from this position.
GSL August 18th $20 calls at $1.25 - Expiring
The shipping stock seemed likely to be called just a week ago. But now I’m not so sure. GSL dipped below the strike price on Monday for the first time since these calls were sold. But the stock is still within pennies of the strike price and things could go either way by Friday’s expiration.
Sell OKE Sep 15th $65 calls at $3.20 or better
The midstream energy company stock got a boost after last week’s earnings report and is currently selling a little above the strike price, but with a month still to go before expiration. Either way, we have secured yet another round of great income from this stock.
CIA STOCK PORTFOLIO | |||||||
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $114.61 | $130.00 | 2.79% | -10.74% |
| Visa Inc. | V | 12/22/21 | $217.96 | $238.99 | NA | 0.75% | 11.62% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $20.23 | NA | 7.36% | -10.52% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $34.89 | $35.00 | 1.42% | -9.33% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $35.38 | $38.00 | 5.06% | 5.17% |
| ONEOK Inc. | OKE | 3/28/23 | $60.98 | $66.24 | NA | 5.77% | 11.78% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $68.92 | $85.00 | 2.71% | -10.88% |
| Hess Corporation | HES | 6/6/23 | $132.25 | $157.68 | $140.00 | 1.11% | 19.62% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $58.62 | $62.00 | 5.23% | -1.78% |
| Digital Realty Trust | DLR | 7/18/23 | $117.31 | $120.33 | $125.00 | 4.06% | 2.57% |
| AbbVie Inc. | ABBV | 7/25/23 | $152.18 | $147.73 | $150.00 | 3.89% | 7.45% |
| Existing Call Trades | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| V $235 Aug 18th call | V230818C00235000 | Sell | 7/11/23 | $9.00 | $6.15 | $9.00 | 4.13% |
| GSL $20 Aug 18th call | GSL230818C00020000 | Sell | 7/11.2023 | $1.25 | $0.44 | $1.25 | 5.00% |
| OKE $65 Sep 15th call | OKE230915C00060000 | Sell | 7/25/23 | $3.20 | $2.75 | $3.20 | 4.92% |
| as of close on 8/11/2023 | |||||||
| SOLD STOCKS | |||||||
| Security | Ticker Symbol | Action | Entry Date | Entry Price | Sale Date | Sale Price | Total Return |
| Innovative Industrial Props. | IIPR | Called | 6/2/20 | $87.82 | 9/18/20 | $100.00 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95.00 | 7.30% |
| U.S. Bancorp | USB | Called | 7/22/20 | $36.26 | 9/18/20 | $38 | 3.42% |
| Brookfield Infras. Ptnrs. | BIP | Called | 6/24/20 | $41.92 | 10/16/20 | $45 | 8.49% |
| Starbucks Corp. | SBUX | Called | 8/26/20 | $82.41 | 10/16/20 | $88 | 6.18% |
| Visa Corporation | V | Called | 9/22/20 | $200.56 | 11/20/20 | $200 | 0.00% |
| AbbVie Inc. | ABBV | Called | 6/2/20 | $91.04 | 12/31/20 | $100 | 12.43% |
| Enterprise Prod. Prtnrs. | EPD | Called | 6/24/20 | $18.14 | 1/15/21 | $20 | 15.16% |
| Altria Group | MO | Called | 6/2/20 | $39.66 | 1/15/21 | $40 | 7.31% |
| U.S. Bancorp | USB | Called | 11/25/20 | $44.68 | 1/15/21 | $45 | 1.66% |
| B&G Foods Inc, | BGS | Called | 10/28/20 | $26.79 | 2/19/21 | $28 | 4.42% |
| Valero Energy Inc. | VLO | Called | 8/26/20 | $53.70 | 3/26/21 | $60 | 11.73% |
| Chevron Corp. | CVX | Called | 12/23/20 | $85.69 | 4/1/21 | $96 | 12.95% |
| KKR & Co. | KKR | Called | 3/24/21 | $47.98 | 6/18/21 | $55 | 14.92% |
| Digital Realty Trust | DLR | Called | 1/27/21 | $149.17 | 7/16/21 | $155 | 5.50% |
| NextEra Energy, Inc. | NEE | Called | 2/24/21 | $73.76 | 9/17/21 | $80 | 10.00% |
| Brookfield Infras. Ptnrs. | BIP | Called | 1/13/21 | $50.63 | 10/15/21 | $55 | 11.65% |
| AGNC Investment Corp | AGNC | Sold | 1/13/21 | $15.52 | 1/19/22 | $15 | 5.92% |
| ONEOK, Inc. | OKE | Called | 5/26/21 | $52.51 | 2/18/22 | $60 | 19.62% |
| KKR & Co. | KKR | Sold | 8/25/21 | $64.52 | 2/23/22 | $58 | -9.73% |
| Valero Energy Inc. | VLO | Called | 11/17/21 | $73.45 | 2/25/22 | $83 | 15.53% |
| U.S Bancorp | USB | Sold | 3/24/21 | $53.47 | 4/13/22 | $51 | -1.59% |
| Enterprise Product Ptnrs | EPD | Called | 3/17/21 | $23.21 | 4/14.2022 | $24 | 11.25% |
| FS KKR Capital Corp. | FSK | Called | 10/27/21 | $22.01 | 4/14/22 | $23 | 13.58% |
| Xcel Energy Inc. | XEL | Called | 10/12/21 | $63.00 | 5/20/22 | $70 | 12.66% |
| Innovative Industrial Props. | IIPR | Sold | 3/23/22 | $196.31 | 7/20/22 | $93 | -51.23% |
| One Liberty Properties | OLP | Sold | 7/28/21 | $30.37 | 8/24/22 | $25 | -12.94% |
| ONEOK, Inc. | OKE | Called | 5/25/22 | $65.14 | 1/20/23 | $65 | 2.66% |
| Xcel Energy, Inc. | XEL | Called | 10/26/22 | $62.57 | 1/20//2023 | $65 | 4.67% |
| Realty Income Corp. | O | Called | 9/28/22 | $60.37 | 2/17/23 | $63 | 5.41% |
| Medical Properties Trust | MPW | Sold | 1/24/23 | $13.22 | 3/21/23 | $8 | -38.00% |
| Brookfield Infrastructure Cp. | BIPC | Called | 11/9/22 | $42.43 | 7/21/23 | $45 | 8.72% |
| EXPIRED OPTIONS | |||||||
| Security | In/out money | Sell Date | Sell Price | Exp. Date | $ return | Total % Return | |
| IIPR Jul 17 $95 call | out-of money | 6/3/20 | $3.00 | 7/17/20 | $3.00 | 3.40% | |
| MO Jul 31 $42 call | out-of-money | 6/17/20 | $1.60 | 7/31/20 | $1.60 | 4.03% | |
| ABBV Sep 18 $100 call | out-of-money | 7/15/20 | $4.60 | 9/18/20 | $4.60 | 5.05% | |
| IIPR Sep 18 $100 call | in-the-money | 7/22/20 | $5.00 | 9/18/20 | $5.00 | 5.69% | |
| QCOM Sep 18 $95 call | in-the-money | 6/24/20 | $4.30 | 9/18/20 | $4.30 | 4.82% | |
| USB Sep 18 $37.50 call | in-the-money | 7/22/20 | $2.00 | 9/18/20 | $2.00 | 5.52% | |
| BIP Oct 16 $45 call | in-the-money | 9/2/20 | $1.95 | 10/16/20 | $1.95 | 4.65% | |
| SBUX Oct 16 $87.50 call | in-the-money | 10/16/20 | $3.30 | 10/16/20 | $3.30 | 4.00% | |
| V Nov 20 $200 call | in-the-money | 9/22/20 | $10.00 | 11/20/20 | $10.00 | 4.99% | |
| ABBV Dec 31 $100 call | in-the-money | 11/18/20 | $3.30 | 12/31/20 | $3.30 | 3.62% | |
| EPD Jan 15 $20 call | in-the-money | 11/23/20 | $0.80 | 1/15/21 | $0.80 | 4.41% | |
| MO Jan 15 $40 call | in-the-money | 11/25/20 | $1.90 | 1/15/21 | $1.90 | 4.79% | |
| USB Jan 15 $45 call | in-the-money | 11/25/20 | $2.00 | 1/15/21 | $2.00 | 4.48% | |
| BGS Feb 19 $27.50 call | in-the-money | 12/11/20 | $2.40 | 2/19/21 | $2.40 | 8.96% | |
| VLO Mar 26 $60 call | in-the-money | 2/10/21 | $6.50 | 3/26/21 | $6.50 | 12.10% | |
| CVX Apr 1 $95.50 call | in-the-money | 2/19/21 | $4.30 | 4/1/21 | $4.30 | 5.02% | |
| AGNC Jun 18 $17 call | out-of-money | 4/13/21 | $0.50 | 6/18/21 | $0.50 | 3.21% | |
| KKR Jun 18 $55 call | in-the-money | 4/28/21 | $3.00 | 6/18/21 | $3.00 | 6.25% | |
| USB Jun 16 $57.50 call | out-of-money | 4/28/21 | $2.80 | 6/18/21 | $2.80 | 5.24% | |
| DLR Jul 16 $155 call | in-the-money | 6/16/21 | $8.00 | 7/16/21 | $8.00 | 5.36% | |
| AGNC Aug 20 $17 call | out-of-money | 6/23/21 | $0.50 | 8/20/21 | $0.50 | 3.00% | |
| OKE Aug 20 $57.50 call | out-of-money | 6/23/21 | $3.50 | 8/20/21 | $3.50 | 6.67% | |
| NEE Sep 17 $80 call | in-the-money | 8/11/21 | $3.50 | 9/17/21 | $3.50 | 4.75% | |
| BIP Oct 15 $55 call | in-the-money | 9/01/21 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24/21 | $2.30 | 11/19/21 | $2.30 | 4.30% | |
| OKE Nov 26 $65 call | out-of-money | 10/20/21 | $2.25 | 11/26/21 | $2.25 | 4.28% | |
| KKR Dec 17 $75 call | out-of-money | 10/26/21 | $3.50 | 12/17/21 | $3.50 | 5.42% | |
| QCOM Jan 21 $185 Call | out-of-money | 11/30/21 | $9.65 | 1/21/22 | $9.65 | 7.17% | |
| OLP Feb 18 $35 Call | out-of-money | 11/19/21 | $1.50 | 2/18/22 | $1.50 | 4.94% | |
| OKE Feb 18 $60 Call | in-the-money | 1/5/22 | $2.75 | 2/18/22 | $2.75 | 5.24% | |
| USB Feb 25 $61 call | out-of-money | 1/13/22 | $2.50 | 2/25/22 | $2.50 | 4.68% | |
| VLO Feb 25 $83 call | in-the-money | 1/18/22 | $4.20 | 2/25/22 | $4.20 | 6.13% | |
| EPD Apr 14th $24 call | in-the-money | 3/2/22 | $1.25 | 4/14/22 | $1.25 | 5.69% | |
| FSK Apr 14th $22.50 call | in-the-money | 3/10/22 | $0.90 | 4/14/22 | $0.90 | 4.09% | |
| XEL May 20th $70 call | in-the-money | 3/30/22 | $3.00 | 5/20/22 | $3.00 | 4.76% | |
| SBLK July 15th $134 call | out-of-money | 6/1/22 | $1.60 | 7/15/22 | $1.60 | 4.80% | |
| OKE Oct 21st $65 call | out-of-money | 8/24/22 | $3.40 | 10/21/22 | $3.40 | 5.22% | |
| OKE Jan 20th $65 call | In-the-money | 11/25/22 | $3.70 | 1/20/23 | $3.70 | 5.68% | |
| XEL Jan 20th $65 call | in-the-money | 11/25/22 | $5.00 | 1/20/23 | $5.00 | 7.99% | |
| O Feb 17th $62.50 call | in-the-money | 12/28/22 | $3.00 | 2/17/23 | $3.00 | 4.97% | |
| QCOM Sep 16th $145 call | out-of-money | 7/20/22 | $11.75 | 9/16/22 | 11.75 | 8.73% | |
| V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/23 | $12.00 | 5.51% | |
| OKE May 19th $65 call | out-of-money | 4/11/23 | $2.70 | 5/19/23 | $2.70 | 4.43% | |
| V Jun 2 $230 call | out-of-money | 4/21/23 | $10.50 | 6/2/23 | 10.5 | 4.82% | |
| BIPC $45 July 21st call | in-the-money | 5/23/23 | $3.25 | 7/21/23 | $3.25 | 7.66% | |