Still Foggy Ahead of the New Year
It’s really the holiday season now. This time of year, investors stop paying attention to the market, like during the last days of the summer. That means, in the absence of game-changing headlines, stocks probably won’t do much of anything until the rubber hits the road after New Year’s.
When sobered up investors take a fresh look at stocks in January what will they see? They’ll see what they saw before they stopped paying attention, a lot of uncertainty.
Inflation is still a wild card. Yes, it appears to have peaked, moving down from 9.1% in June to 7.1% in November. But it’s still way too high, and a long way from the Fed’s 2% target. Nobody knows how sticky it will be. Therefore, no one knows how high the Fed will raise rates and how long they’ll leave them high.
Then there’s recession. Most economists are predicting a recession in 2023. But the severity is unknown. It could be short and mild or longer and deep. Markets will have trouble generating lasting upside traction until these issues become clearer. That should take many months.
Until then, defense is still king. Companies that can generate earnings growth and pay dividends through a recession are the safest and best places to be until investors can see an end to the current quandaries and a turning point six to nine months down the road. At that point, more cyclical stocks can rally and make up for lost time.
It’s also a good time to take income in the form of covered call premiums where possible. We’ve already seen several bear market rallies. The rising stock prices don’t continue into the recovery and the next bull market, but they do provide an opportunity to lock in an income with high call premiums.
There should be great opportunity at some point in the new year. But for now, defense and income can get us to the Promised Land in good shape.
Trades past month
November 23rd
Sell O January 20th $65 calls at $2.35 or better – Pending
November 25th
SOLD OKE January 20th $65 calls at $3.70
SOLD XEL January 20th $65 calls at $5.00
December 7th
Sell O January 20th $65 calls at $2.35 or better – Remove
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.5%
The infrastructure stock and company have a phenomenal track record of locking in stable income from crucial assets. It’s also looking to the future and focusing on megatrends of digitalization, decarbonization, and deglobalization. It’s invested heavily in data centers and cell towers, natural gas midstream assets, and crucial onshore manufacturing in computer chips. The stock should be solid in a recession with strong growth for a defensive company beyond that. BUY
Global Ship Lease, Inc. (GSL)
Yield: 8.9%
There are plenty of headwinds for this shipping company. There are ongoing covid issues in China, a global economic slowdown, and falling shipping rates. Although the longer-term supply/demand dynamic is positive for container shipping, it’s a rough time. However, GSL is still off the bottom made in September. Perhaps the bottom is already in, and the market is anticipating better times ahead as China reopens. HOLD
Intel Corp. (INTC)
Yield: 5.4%
Apparently, the dunking in technology isn’t over yet. The sector has been the worst performing on the market over the past week as the market turned south again. Things may get worse in the near term, but the situation will surely improve for technology at some point. Hopefully, the big turnaround isn’t that far off. Intel’s individual prospects should significantly improve as growth investments come to fruition. It’s been a painful slog. But it could prove to be worth the pain over time. BUY
ONEOK Inc. (OKE)
Yield: 5.8%
This midstream energy stock has rallied sharply off the September lows but has moved sideways in an up-and-down fashion over the last month. Although the rally has sputtered, it is likely that OKE and other midstream energy companies have the right stuff going into 2023. Revenues are both recession- and inflation-resistant. The high dividend is safe. And the stock is still reasonably valued. The short-term behavior of the stock is anyone’s guess. But OKE should deliver positive results over the course of 2023. BUY
Realty Income Corp. (O)
Yield: 4.7%
The legendary income REIT seems to be on its own schedule. It did level off after rising sharply in October and November. But it has held up extremely well so far in the recent market selling. The stock is almost always bouncy. And there is no telling what the next few weeks might bring. But this is a popular and defensive income stock that should hold its own in the event of a recession next year. Investors should find their way to O and the stock should be buoyant. BUY
Star Bulk Carriers Corp. (SBLK)
Yield: 33.3%
The third-quarter earnings were significantly lower than last year’s quarter as shipping volumes and rates have decreased in the slower economy. The stock is also facing headwinds from the China covid situation. But slowing business has already been factored into the price as the stock is down 40% from the high. The short term has been ugly in the downturn but is made easier with the massive dividend, with the last one accounting for 6% of the current price. It is likely still the early innings of a multiyear positive cycle for shipping. And Star Bulk is one of the very best. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.7%
After a terrible year, QCOM is enduring another selloff in the latest market downturn. I can’t say that things won’t get worse before they get better. But it will surely get better. This is a bargain-basement price compared to where QCOM is likely to be priced a year from now. Technology stocks can turn around fast and make up for lost time as the environment changes, and it likely will in the new year. The market has been pricing in bad news all year. Before long, the market may start sniffing out a recovery. HOLD
Visa Inc. (V)
Yield: 0.9%
The company once again killed it on earnings. The payments processing giant continues to benefit from the end of covid restrictions internationally despite the slower economy. The market is not being kind to cyclical stocks right now. Of course, when the market eventually turns, those stocks tend to be the first to recover when the market eventually recovers, and V has a history of being one of the first stocks to move higher when that happens. We have had to endure a little pain en route to likely better performance in 2023. HOLD
The Williams Companies, Inc.
Yield: 5.3%
WMB had been superior since late September but has finally capitulated and moved lower this month. The latest round of selling has spared precious few stocks. But the prospects for next year remain excellent and the relative performance of WMB should be strong. The company posted strong earnings because of resilient natural gas demand, something that is likely to endure through the recession based on shortages overseas. We’ll see which way it breaks next. But it should be solid through the new year. BUY
Xcel Energy Inc.
Yield: 2.8%
The clean energy utility stock has pulled back this past week along with everything else. But it is still very much in an uptrend that began in early October. It may bounce around with the market in another downturn. But it will likely resume moving higher in the absence of overwhelming selling in the market. XEL in particular is a great stock to own ahead of a likely recession in 2023. But the market remains uncertain, and we’ll see if XEL moves back toward the high or pulls back more in the weeks ahead. BUY
Active Covered Call Trades
Sell OKE January 20th $65 calls at $3.70 or better
I do like this stock going forward. Earnings should be resilient in an environment of inflation and recession. But it makes sense to target stocks for calls after a rally and get the high premium and possible high total return. The stock has fallen of late and call premiums are well below the price we got. It is likely that the stock won’t be called. But even if it is, we still have WMB.
Sell XEL January 20th $65 calls at $5.00 or better
These in-the-money calls were sold despite a good prognosis for XEL in 2023 because I didn’t trust this market in the near term. We generated a stellar income from the call premium after a market rally when the stock was high. If the market weakness continues in January, the stock could fall below the strike price. But regardless of what happens, we locked in great income in a tough market.
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 | $112.61 | NA | 2.66% | -13.43% |
| Visa Inc. | V | 12/22/21 | $217.96 | $204.82 | NA | 0.88% | -5.30% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $16.20 | NA | 8.86% | -31.18% |
| ONEOK, Inc. | OKE | 5/25/22 | $65.14 | $63.37 | $67.00 | 5.80% | 0.36% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $18.54 | NA | 33.27% | -33.34% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $26.79 | NA | 5.42% | -31.77% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $32.07 | $38.00 | 5.30% | -7.49% |
| Realty Income Corporaton | O | 9/28/22 | $60.37 | $63.54 | $63.00 | 4.69% | 6.54% |
| Xcel Energy Inc. | XEL | 10/26/22 | $62.57 | $69.40 | $65.00 | 2.79% | 10.92% |
| Brookfield Infrastructure corp. | BIPC | 11/9/22 | $42.43 | $40.67 | $46.00 | 3.54% | -3.39% |
EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| OKE Jan 20 $65 call | OKE230120C00065000 | Sell | 11/25/22 | $3.70 | $1.53 | $3.70 | 5.68% |
| XEL Jan 20 $65 call | XEL230120C00065000 | Sell | 11/25/22 | $5.00 | $4.60 | $5.00 | 7.99% |
| as of close on 12/19/2022 | |||||||
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% |
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./01/2021 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24.2021 | $2.30 | 11/19.2021 | $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% | |
| QCOM Sep 16th $145 call | out-of-money | 7/20.2022 | $11.75 | 9/16/22 | 11.75 | 8.73% | |