A Black Swan
We were rolling along in a choppy market to nowhere as the sticky inflation/hawkish Fed conundrum promised to play out for longer than hoped at the beginning of the year. But over the past several days a Black Swan event popped up, the failure of Silicon Valley Bank.
The government appears to have relieved fears of contagion for now by promising to make good on all deposits. The market seemed relieved and moved higher on Monday. There may be more problems in the days and weeks ahead. But it seems that a crisis is likely to be averted at this point.
Assuming the fallout can be controlled and a crisis will be averted, the market might actually find some good in this latest fandango. It may temper the Fed. The banking issue is in large part a consequence of the steep rate hiking cycle and subsequent carnage in the bond market. The negative fallout could mellow the Fed as it realizes that negative consequences may be greater than the Central Bank recently thought.
Already the odds have shifted toward a likely 0.25% hike in this month’s meeting, down from the expected 0.50% hike before this situation. We’ll see how things play out. But bad news can be good news in the eyes of short-sighted Wall Street types. If the issues can be contained and also make the Fed less hawkish, it could be a positive for the market, at least in the near term.
Dividends and income continue to be the best offset for this market. And there should be many more stocks and covered call opportunities in the weeks and months ahead.
Trades This Month
February 17th
O February 17th $62.50 calls at $3.00 – Expired
Realty Income (O) – Called
February 21st
Sell QCOM March 31st $130 calls at $7.00 or better
March 7th
Sell QCOM March 31st $130 calls at $7.00 – Remove
March 14th
Medical Properties Trust - Rating change “BUY” to “HOLD”
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.5%
The infrastructure juggernaut has been very bouncy over the last two years. It was hit along with everything else by covid as its transportation assets suffered. Lately, it has been hurt by the strong dollar and higher interest rates as the company does a lot of business overseas and has a relatively high credit balance. But BIPC has been forming a solid base at current levels. The stock is well below the 52-week high made last April but it still has very resilient earnings, a great track record, and a safe dividend. BUY
Global Ship Lease, Inc. (GSL)
Yield: 7.7%
The container shipping company pulled back over the past couple of weeks after soaring to the highest price since last Spring. GSL has often pulled back like this in the past after a price surge. Earnings were strong and the company should continue to benefit from the opening of the Chinese economy in the months ahead. The longer-term supply/demand dynamic is positive for container shipping and the stocks may be in a longer-term bull market. GSL still sells at a cheap valuation with a safe dividend and things are looking up. HOLD
Intel Corp, (INTC)
Yield: 1.9%
This beleaguered stock has stayed relatively steady since announcing the 66% dividend cut. That implies that perhaps the stock has already bottomed out and the most likely future trend for the stock price is higher. The price is so low already there wasn’t much left to punish. INTC also managed to move over 3% higher last week when the overall market fell 5%. Intel is still a powerful industry player and its recent attempts to catch up to its competitors should succeed to a least some degree over time. Meanwhile, the stock sells at a fire sale price at just about book value. The portfolio will hold on for now. HOLD
Rating change “BUY” to “HOLD”
Medical Properties Trust, Inc. (MPW)
Yield: 11.5%
MPW plunged 27% in the last month after the market didn’t like its fourth-quarter earnings report. While the company did beat expectations on both the top and bottom lines, investors didn’t like some of the information that came out of the report.
It’s tough to say specifically what spooked investors most or if it was just the negative totality. The company typically raises the first quarter dividend, but it didn’t this time. They also indicated that higher interest rates will significantly slow the pace of acquisitions this year. And finally, they said that one of the issues with a tenant will take 12 to 18 months before MPT is made whole. The lack of growth is already reflected in the stock that sells at just six times cash flow.
The main concern now is the safety of the dividend. With such a high payout and limited growth over the next year, there is concern. The stock will be reduced to HOLD and any further weakness in the stock may prompt a sale, even via “Special Alert.” HOLD
Realty Income Corp. (O)
Yield: 4.8%
The legendary income REIT reported solid earnings last quarter. It grew profits by 9.2% year over year, added $9 billion in new properties for the year, and reported the highest occupancy rate in the last 20 years at 99%. But the stock has been moving lower recently on what is likely a long and bouncy slow slog higher over time. This is a popular and defensive income stock that should hold its own with inflation and in the event of a recession. HOLD
Star Bulk Carriers Corp. (SBLK)
Yield: 23.6%
Like GSL, SBLK had been impressive prior to this month. SBLK moved up a lot in February despite it being a tough month for the overall market. The shipping company pulled back over the last couple of weeks, which is not unusual for this stock after a surge. It is benefiting from more Chinese traffic as the country opens again. 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. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.6%
A stellar January was followed by a lousy February. QCOM soared about 29% in January and the price reached the highest level since the summer. But the stock pulled back about 8% in February. And it’s been more downside so far this month. QCOM is tied to the fortunes of the market and the tech sector in the near term. And the sector weakened after a strong start to the year as inflation appears to be hanging around and the recent banking issues. At some point this year, the market should start sniffing out the recovery. And QCOM can make up for lost time fast when it moves. HOLD
Visa Inc. (V)
Yield: 0.8%
I like V over the longer term. It’s a great business that will continue to grow in the years ahead. And the stock is still relatively cheap. After an impressive -3.4% return in last year’s bear market, V delivered strong returns in the earlier part of the year. Even if the market continues to stumble and cyclical stocks go out of favor again, V should continue to hold up relatively well, and it showed a preview of how well it will react when the market finally turns for good. It’s well worth holding through the uncertainty into the next recovery. HOLD
The Williams Companies, Inc.
Yield: 6.0%
This midstream energy company has been a bummer this year. After outperforming its peers in the down market this fall, WMB is underperforming both the overall market and its peers YTD. Williams reported solid earnings last quarter with 21% full-year growth over 2021. The issue is that the company expects slower growth of just 3% in 2023 as the benefit of recent acquisitions draws tougher comparisons. But the dividend is rock solid with 2.37 times coverage from cash flow and future growth is likely to resume at a stronger clip in the years ahead. It also has an inflation- and recession-resistant business that should help it to outperform the market through the rest of this year. BUY
Active Covered Call Trades
Sell V March 17th $220 calls at $12.00
With only a few days until Friday’s options expiration, V is selling around 4 per share below the strike price. The down market at the end of the week pulled the stock lower. I do like V over the longer term for its growing earnings and inflation protection. Hopefully, the stock won’t get called and we can sell another call later.
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 | $115.19 | NA | 2.56% | -10.91% |
| Visa Inc. | V | 12/22/21 | $217.96 | $216.14 | NA | 0.82% | 0.13% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | 19,25 | NA | 7.71% | -16.58% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $21.68 | NA | 23.56% | -20.10% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $27.22 | NA | 1.89% | -29.79% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $28.90 | $38.00 | 5.99% | -15.34% |
| Brookfield Infrastructure Cp. | BIPC | 11/9/22 | $42.43 | $42.89 | $46.00 | 3.51% | 2.77% |
| Medical Properties Trust | MPW | 1/24/23 | $13.22 | $8.79 | $15.00 | 12.11% | -33.51% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| V Mar 17 $220 call | V230317C00215000 | Sell | 1/24/23 | $12.00 | $1.33 | $12.00 | 5.51% |
| as of close on 3/10/2023 | |||||||
| 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% |
| Realty Income Corp. | O | Called | 9/28/22 | $60.37 | 2/17/23 | $63 | 5.41% |
| 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% | |
| 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 | 7/20.2022 | $11.75 | 9/16/22 | 11.75 | 8.73% | |