A Big Week
Stocks are bracing for the January inflation report, which comes out today. The number could determine the next thrust of the market.
It’s been a good year so far for stocks, despite the slight pullback last week, as investors embrace the notion of falling inflation and a Fed that will finish raising interest rates around midyear. But a bad inflation report could put the kibosh on that optimism and send stocks reeling.
The market is expecting a further decline in January CPI to 6.2%, from 6.5% last month and 9.1% at the peak in June. Such a reading may confirm investors’ recent optimism and reignite the rally. But there could be a disappointment. There could be some fireworks after the report. We’ll see.
I don’t know what will happen. But regardless of this particular number, I believe it is likely that the market will not gain significant and lasting upside traction until later this year. There is still too much uncertainty regarding inflation and the Fed as well as the severity and duration of an economic downturn.
For that reason, the portfolio continues to have a defensive bias with recent additions having recession-resistant businesses and covered calls sold on several positions into the recent rally.
Meanwhile, it’s earnings season. Several portfolio positions report earnings this week or next, including Global Ship Leasing (GSL), Star Bulk Carriers (SBLK), Williams Companies (WMB), Realty Income (O), and Medical Properties Trust (MPW). Between the earnings reports and the inflation number, we may have a much better idea of the near-term direction of the portfolio and the market by this time next week.
Trades This Month
January 20th
OKE January 20th $65 calls - Expired
XEL January 20th $65 calls – Expired
ONEOK, Inc. (OKE) – Called
Xcel Energy Inc. (XEL) – Called
January 24th
Purchased Medical Properties Trust, Inc. (MPW) - $13.22
Sold V March 17th $220 calls at $12.00 or better
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.6%
The infrastructure juggernaut reported 12% funds from operations (FFOs) per share growth in 2022 and 10.9% in the fourth quarter versus last year’s comparable periods. The company is benefiting as recent acquisitions come online, particularly a big acquisition of North American midstream energy company Inter Pipeline. The stock has been weak lately because of rising interest rates as Brookfield has a high level of debt. But those rates should come down in a recession, and earnings will remain resilient. BUY
Global Ship Lease, Inc. (GSL)
Yield: 7.8%
Things are looking up for this container shipping company. Despite having pulled back a little over the past couple of days, GSL is up over 15% YTD and near the highest price since the summer. The longer-term supply/demand dynamic is positive for container shipping and the stocks may be in a longer-term bull market. Plus, the opening of China could also be a positive catalyst for shipping activity and rates in the near term. The company announces fourth-quarter earnings soon and hopefully gets an additional lift from that. HOLD
Intel Corp, (INTC)
Yield: 5.2%
The recent bad news suggests that the stock has already bottomed out. Earnings were terrible and will be again next quarter as PC demand continues to plunge in the slowing global economy. But the stock didn’t really falter after the news. That suggests that the market already priced in a rotten first half. The company is employing a massive cost-cutting program and new products should also help the bottom line in the second half of this year. HOLD
Medical Properties Trust, Inc. (MPW)
Yield: 9.6%
This high-paying and recession-resistant hospital REIT has pulled back a little over the past couple of weeks after rallying strongly in the earlier part of the year. But the stock still remains in a technical uptrend that began in October. The dividend is safe, and the operational performance of the company is solid. The company reports earnings next week that can hopefully give the stock a boost, as earnings grew by better than 30% last quarter and should be good again this quarter. With a defensive business, this should be a good year. HOLD
Realty Income Corp. (O)
Yield: 4.5%
The legendary income REIT has been trending slowly higher since the middle of October. Interest rates appear to have peaked and the REIT sector is having a much better year so far. O has delivered a positive return over the last year while the overall market is down. O also finally eclipsed the elusive 65 per share level. Hopefully, the stock can break out and run for more. But much depends on the overall market. A down market could spoil the party. But this is a popular and defensive income stock that should hold its own in the event of a recession. HOLD
Star Bulk Carriers Corp. (SBLK)
Yield: 28.4%
SBLK had been sort of bouncing around in a certain range for many months but has recently broken out to the highest level since August. Lower shipping rates and a slower global economy have already been factored into the stock and it is likely still the early innings of a multiyear positive cycle for shipping. The shipping company may have already seen the bottom with better times ahead. Star Bulk reports earnings later this week and can hopefully get a boost. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.3%
It’s been a rough market for QCOM. The stock is down over 20% for the last one-year period. But the longer-term prognosis remains bright, and the stock is also showing signs of having perhaps bottomed out. Qualcomm reported lousy earnings for the last quarter, and it appears that next quarter won’t be much better. Yet the stock remained quite resilient after the report. That suggests that this news was already factored into the stock price, and the market is looking towards improvement in the second half of the year. QCOM is up over 17% YTD and has cracked the 130 per share level for the first time since September. HOLD
Visa Inc. (V)
Yield: 0.8%
The payments processing company stock is a great stock for the longer term. Markets like this are great times for longer-term investors to buy a stock like this. The near-term performance has picked up as well. V is up about 10% YTD as financial stock performance has improved. It’s also near the highest level since last April. Much will depend on the performance of the overall market in the near term. But even if the market rolls over, V held up remarkably well last year with a -3.4% return and should thrive in the likely rebound this year. HOLD
The Williams Companies, Inc.
Yield: 5.6%
WMB has been disappointing this year with a -3.28% return YTD. It held up much better than its midstream energy peers when the sector took a hit in the fall. But it has been a laggard since the sector performance improved. The recent weakness may be because natural gas prices have plunged lately and it may be affecting LNG gas exports, on which Williams is highly dependent. But natural gas prices are likely to bounce back in the months ahead. Williams also reports earnings next week and could get a bump from that. BUY
Active Covered Call Trades
Sell O February 17th $62.50 calls at $3.00 or better
The stock has certainly broken out to a new level recently and currently sells well above the 62.50 per share strike price at over 67 per share. At this point, it appears likely to be called. But this is a risky market and a lot can change in a few days. We locked in a good income return regardless of what happens.
Sell V March 17th $220 calls at $12.00 or better
V has been looking very good as I mentioned above. It broke through the 230 per share level and is still near the high point in over nine months. But this is a cyclical stock that could pull back if the economy weakens and the market sours on cyclical stocks.
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 | $129.56 | NA | 2.33% | -0.84% |
| Visa Inc. | V | 12/22/21 | $217.96 | $227.99 | NA | 0.79% | 5.25% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $19.12 | NA | 7.82% | -18.52% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $22.70 | NA | 28.37% | -17.63% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $28.08 | NA | 5.25% | -28.30% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $31.82 | $38.00 | 5.63% | -8.21% |
| Realty Income Corporaton | O | 9/28/22 | $60.37 | $67.26 | $63.00 | 4.46% | 12.94% |
| Brookfield Infrastructure Cp. | BIPC | 11/9/22 | $42.43 | $42.82 | $46.00 | 3.62% | 1.28% |
| Medical Properties Trust | MPW | 1/24/23 | $13.22 | $12.09 | $15.00 | 9.59% | -8.55% |
EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| O Feb 17 $62.50 call | O230217C00062500 | Sell | 12/28/22 | $3.00 | $4.37 | $3.00 | 4.97% |
| V Mar 17 $220 call | V230317C00215000 | Sell | 1/24/23 | $12.00 | $11.60 | $12.00 | 5.51% |
| as of close on 2/10/2023 | |||||||
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% |
| 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% | |
| 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% | |
| QCOM Sep 16th $145 call | out-of-money | 7/20.2022 | $11.75 | 9/16/22 | 11.75 | 8.73% | |