The Market Hangs Tough, for Now
The market is up for the year. That’s promising after last year’s debacle. But stocks have been going sideways since the beginning of April and can’t seem to decide on the next decisive direction.
On the one hand, the market has shown inspiring resilience amid the troubling headlines. On the other hand, there is a strong chance that the next significant move is lower after stocks have rallied 20% from the October low.
The most recent focus is the debt limit standoff in Washington. Things are likely to get very dicey in the market if a deal isn’t reached by the end of this month. But even if that crisis is averted, there is still the bank thing, a possible looming recession, inflation and the Fed.
Anything can happen. But it seems unlikely that the market will just whistle past all that stuff and add to the already impressive rally from the October low. At best, the market continues to bounce around until there is more clarity on the plethora of issues. But there is a risk of another selloff in the weeks and months ahead.
It still pays to focus on adding safe stocks of defensive companies and generate a high income from dividends and covered calls when advantageous.
Past Month Activity
April 18th
SOLD V June 2nd $230 calls at $10.50
April 25th
Purchased NextEra Energy (NEE) - $77.82
May 16th
ONEOK Inc. (OKE) – Rating change “BUY” to “HOLD”
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.3%
The infrastructure company is having a good May so far. BIPC is up over 10% this month while the market has been flat over the same period. Brookfield reported a solid earnings quarter with funds from operations (FFOs) per share growth of 12.5% over last year’s quarter. The company benefited from recent expansions and acquisitions but also showed solid organic growth. Brookfield is showing strength amid market choppiness and should continue to be a solid holding amid inflation and/or recession. BUY
Global Ship Lease, Inc. (GSL)
Yield: 8.0%
The container shipping company is getting a bump from another good earnings report last week. 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. Shipping rates have also recovered this year. But the Chinese recovery isn’t materializing, and rates have flattened since the early part of the year. Rates have been stable, but the expected bump from increased Chinese traffic isn’t there, at least so far. HOLD
Intel Corp, (INTC)
Yield: 1.7%
Intel posted two quarters of negative earnings and guided for more of the same for the rest of the year. The company also slashed the dividend by 80% to save cash for its ambitious turnaround program. Yet, INTC is up 20% YTD. That indicates that the stock has likely bottomed out already. Also, the early release of its CPU chip for data centers indicated that production problems have been solved and bodes well for an earlier-than-expected turnaround. HOLD
NextEra Energy, Inc. (NEE)
Yield: 2.4%
This combination regulated and clean energy utility stock has bounced around over the past two years and is currently at the lower end of that range. It has been trending higher since the beginning of March as the risk of recession has grown and defensive stocks have outperformed. But NEE is still around 15% below the recent high. 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 is still well positioned as a defensive stock with growth in a highly uncertain market. This company also has a higher level of growth from its clean energy company and can certainly participate in a rally if and when the market breaks out. BUY
Rating change “BUY” to “HOLD”
ONEOK, Inc. (OKE)
Yield: 5.9%
The stock is down over 8% at midday on Monday after ONEOK announced a $19 billion deal to buy midstream company Magellan Midstream Partners (MMP). The deal will turn ONEOK from a natural gas operator to a diversified midstream company that services oil and refined products as well. The market doesn’t seem to like it because the benefits are primarily longer-term, and Wall Street doesn’t think like that. It involves the assumption of Magellan’s $5 billion in debt and $8.8 billion in new equity. That could hurt performance in the near term. We’ll see how things play out in the days ahead. But the portfolio is Holding for now. HOLD
Star Bulk Carriers Corp. (SBLK)
Yield: 19.9%
The dry bulk shipping company had 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 GLS, Star Bulk hasn’t massively increased its 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 is near the recent lows and could be a SELL if there is further weakness in the stock. It reports earnings later this week. HOLD
Qualcomm Corp. (QCOM)
Yield: 3.1%
The chipmaker posted mixed earnings results that the market hated earlier this month. The stock fell 6% on the day of the report. Because of slower smartphone sales as the global economy slows and the market gets more saturated, revenue declined 17% and earnings fell 33% in the quarter. That wasn’t a surprise, and Qualcomm beat expectations. But it was pessimistic about the rest of the year and indicated the handset chip market may not have bottomed out.
That’s a problem because handset chips accounted for 77% of revenue. The stock is already down more than 40% from the high on expected lower smartphone sales. There probably isn’t much downside in the stock from here. Hopefully, QCOM will level off over the next week. HOLD
Visa Inc. (V)
Yield: 0.8%
V has been hanging very tough near the high point of the recent range. The payments processing company once again exceeded expectations on earnings. Visa grew earnings per share by 17% and revenues grew double digits versus last year’s quarter. And this is what the company does in a bear market with the economy slowing. It can really take off when the market recovers for good. V should be higher by the end of the year but there is a chance it pulls back somewhat after moving to recent highs if the market weakens. HOLD
The Williams Companies, Inc. (WMB)
Yield: 6.1%
The midstream energy company 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 growing. WMB has been a struggling stock this year because of natural gas prices, which have crashed. Although the company is not highly levered to energy prices, it is affected by turbulence in its industry. Prices have fallen largely because of the unusually warm winter temperatures throughout the country and the world. But it is a temporary problem for a fuel source that should own the next decade. BUY
Existing Call Trades
Sell OKE May 19th $65 calls at $2.70 or better
The option expires on Friday. After Monday’s drop, the market price is more than 6 per share below the strike price and highly unlikely to be called. We got another big premium from this stock. Going forward, we will have to evaluate the market’s reaction to the Magellan deal.
Sell V June 2nd $230 calls at $10.50 or better
V is still hovering slightly above the strike price despite the choppy market with more than three weeks to go before the option expires. Much will depend on the market over the next couple of weeks. But either way, we will get a high income and solid total return.
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 | $103.62 | NA | 3.08% | -19.86% |
| Visa Inc. | V | 12/22/21 | $217.96 | $231.38 | NA | 0.78% | 7.39% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $18.65 | NA | 8.04% | -19.18% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $18.64 | NA | 19.91% | -31.31% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $28.95 | NA | 1.73% | -25.03% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $29.28 | $38.00 | 6.11% | -14.23% |
| Brookfield Infrastructure Cp. | BIPC | 11/9/22 | $42.43 | $45.95 | $46.00 | 3.33% | 10.10% |
| ONEOK Inc. | OKE | 3/28/23 | $60.98 | $63.72 | NA | 5.99% | 6.02% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $77.96 | $85.00 | 2.40% | 0.18% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| OKE $65 May 19th call | OKE230519C00065000 | Sell | 4/11/23 | $2.70 | $0.10 | $2.70 | 4.43% |
| V $230 June 2nd call | V 230602C00230000 | Sell | 4/21/23 | $10.50 | $5.15 | $10.50 | 4.82% |
| as of close on 5/12/2023 | |||||||
| 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% |
| 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% | |