An Impressive First Half
After a glorious first half in which the S&P 500 advanced more than 16%, things are looking better for the market than they have in a long time.
Inflation is way down, GDP is better than previously thought, and housing and the consumer are both still strong. Sure, the Fed is still squawking a little bit, but they must be almost done hiking rates, right? The big bad recession never arrived, and it looks like the soft-landing people were right.
True, it has been an incredibly thin rally with only about 10 large-cap tech stocks accounting for almost all the YTD gains. But the rally broadened out over the month of June. Perhaps that’s a portent of things to come. Also, a good first half of the year is historically most often followed by a solid second half.
But there are risks out there. Rarely do stocks rally like this in a deteriorating economy, especially one in which earnings are contracting. Even if the economy is not slowing yet, the Fed seems bent on raising rates until it is. It’s possible that a recession has just been postponed until next year.
The portfolio has cyclical stocks that will benefit if the market and economy continue to thrive and defensive stocks that should outperform in a less positive case. In any event, the market looks strong for the immediate future, and we will hold off selling covered calls while stocks have the chance for more upside in the weeks ahead.
Past Month Activity
June 2
V June 2 $230 calls at $10.50 - Expired
June 6
Purchased Hess Corporation (HES) - $132.25
June 27
Purchased Realty Income Corporation (O) - $60.19
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.4%
The infrastructure company stock has pulled back from the recent high. But BIPC is still around the higher levels of the recent range. The stock got new life after a sluggish period because Brookfield reported a solid earnings quarter with funds from operations (FFOs) per share growth of 12.5% over last year’s quarter. The stock had been suffering from the lull in defensive stocks, but that performance disparity might not last. A pullback from the recent spike higher is typical for this stock. But it is getting cheaper ahead of a market where the rally is broadening out. HOLD
Global Ship Lease, Inc. (GSL)
Yield: 7.9%
It’s been a tough market for this container shipping company stock since last year. But it has bounced off the bottom and operational performance is still solid. Last quarter Global grew net revenue 3.7% and normalized earnings per share by 14.6% while continuing to expand its fleet of ships. The longer-term supply/demand dynamic is excellent and bodes well for the future. The near-term recovery in the stock was interrupted because the Chinese recovery hasn’t materialized. But it’s off the low and up sharply so far this month. Perhaps the new faith in a soft landing will propel GSL higher. HOLD
Hess Corporation (HES)
Yield: 1.3%
It’s hard to say where this stock will be in a month or two. It largely depends on energy prices which depend on economic activity and demand. There are a plethora of factors putting upward pressure on oil prices in the months ahead. The longer-term supply/demand dynamic favors energy very much and Hess is a special case. It can increase production almost at will with very low-cost production. It should be stellar if energy stocks move higher again. But the stock is also uniquely equipped to deal with short-term turbulence in the industry. BUY
Intel Corp, (INTC)
Yield: 1.6%
INTC pulled back sharply last week after soaring in the earlier part of June. The stock had surged more than 30% in just a couple of weeks after Nvidia (NVDA) rocked the market with blowout earnings mostly from excitement regarding its expanding chip production capabilities. The Nvidia CEO expressed interest in partnering and the company is continuing to ink new deals around the world. INTC is still at the highest level since last summer and is increasingly being seen as a cheap stock with a bright future. HOLD
NextEra Energy, Inc. (NEE)
Yield: 2.5%
This combination regulated and clean energy utility stock has bounced around all over the place for the past two years and is currently at the lower end of that range. NEE is still well below the recent high. Defensive stocks have floundered. But that might not last. This company is targeting earnings per share growth of 6% to 8% annually through 2026 and 10% per year dividend growth through at least 2024. NEE has bounced nicely off the low and hopefully can continue the momentum. BUY
ONEOK, Inc. (OKE)
Yield: 6.5%
After getting clobbered last month when the market hated its purchase of Magellan Midstream Partners (MMP), OKE has been soaring right back and has regained nearly all of those loses. The deal will turn ONEOK from a natural gas operator to a diversified midstream company that services oil and refined products as well. The deal is a longer-term positive that could hurt performance in the near term. But this will remain a solid performer with high and safe dividend and reliable earnings in an environment where overall market earnings are contracting. HOLD
Realty Income Corp. (O)
Yield: 5.1%
This legendary monthly income stock is part of two underperforming sectors in the first half, Real Estate and Consumer Staples. It currently sells well below the pre-pandemic high, despite having higher earnings, and the stock is now near the lowest point since last summer. But income and safety may be at a premium in the second half of the year. Either investors will crave defense again or the rally will broaden out to include this year’s lagging sectors. O is a great long-term hold with a phenomenal track record. But the track record is even better when it has been purchased when it’s down. BUY
Star Bulk Carriers Corp. (SBLK)
Yield: 20.1%
The dry bulk shipping company rallied earlier this year as shipping rates recovered somewhat. But the stock has pulled back to about even YTD as the Chinese recovery hasn’t delivered the desired effect on shipping rates. Unlike GSL, Star Bulk hasn’t massively increased their fleet size and year-over-year comparisons are tough as shipping rates have fallen. Although it is likely still the early innings of a multiyear positive cycle for shipping, the stock recently moved near the low. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.7%
Like INTC, QCOM has pulled back in the last couple of weeks after its initial AI surge. It’s bouncing around as investors fluctuate between confidence in the company’s future and waning AI excitement. Qualcomm describes itself as the “on-device AI leader,” and the company should benefit mightily from the increasing shift towards AI and profits are now likely to soar sooner than previously expected. But Qualcomm doesn’t benefit as directly and immediately from AI as some other companies, and it is still vulnerable to lower handset sales in the near term. HOLD
Visa Inc. (V)
Yield: 0.8%
V loves the soft-landing talk. Inflation is down, GDP was revised higher, and the consumer is still strong. In addition, Visa just purchased a Brazilian fintech company that rival MasterCard (MA) also wanted and beat them out. As a result, V soared to a new 52-week high and the highest price in about two years. The stock has broken out to a new level and may have further to run. I will refrain from selling a call at this point in the hopes that the recent move has more left in the tank. HOLD
The Williams Companies, Inc. (WMB)
Yield: 5.6%
This year has not been kind to defensive stocks or energy stocks so far. Natural gas prices have fallen largely because of the unusually warm winter temperatures throughout the country and the world. But it isn’t affecting the bottom line. Williams once again delivered on earnings and beat expectations for the fourth straight quarter. Earnings per share grew a whopping 36% over last year’s quarter as natural gas volumes remained strong and growth. WMB has pulled back from the early June spike but has since been moving higher. BUY
Existing Call Trades
SOLD BIPC July 21 $45 calls at $3.25
After a big spike higher, BIPC is indeed pulling back as I suspected it might. The portfolio sold well in-the-money calls when the stock was riding high. But it has pulled back closer to the strike price. There are still weeks to go before expiration. We’ll see what happens. But we will secure a great income no matter what.
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 | $119.04 | NA | 2.72% | -7.29% |
| Visa Inc. | V | 12/22/21 | $217.96 | $237.48 | NA | 0.80% | 10.23% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $19.40 | NA | 7.87% | -14.19% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $17.70 | NA | 21.44% | -33.54% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $33.44 | NA | 1.50% | -13.41% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $32.63 | $38.00 | 5.59% | -3.00% |
| Brookfield Infr.Cp. | BIPC | 11/9/22 | $42.43 | $45.58 | $46.00 | 3.45% | 10.11% |
| ONEOK Inc. | OKE | 3/28/23 | $60.98 | $61.72 | NA | 6.52% | 2.69% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $74.20 | $85.00 | 2.55% | -4.05% |
| Hess Corporation | HES | 6/6/23 | $132.25 | $135.95 | $140.00 | 1.31% | 3.13% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $59.79 | $62.00 | 5.10% | -0.24% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| BIPC $45 July 21st call | BIPC230721C00045000 | Sell | 5/23/23 | $3.25 | $1.60 | $3.25 | 7.66% |
| as of close on 6/30/2023 | |||||||
| 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 | 1/20/23 | $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% |
| 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 | 9/24.2021 | $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% | |