Technology Explodes
Last week was a big week in the market. Game-changing news in the technology sector that significantly improves future earnings projections for many companies is causing the sector to soar.
AI or artificial intelligence had been seen as a huge growth engine going forward as companies invest heavily in the technology. Those growth projections got a huge shot of adrenaline and the AI phenomenon got real when semiconductor company Nvidia (NVDA) reported earnings and guidance that blew the doors off expectations because of much higher investment and spending in the technology than previously thought.
It is estimated that investment in AI will more than double, to $1 trillion, by 2030. The projections for companies that benefit are being adjusted significantly higher. The technology sector rose more than 5% last week, 15% for the past month, and 34% YTD. Meanwhile, eight of the 11 S&P 500 sectors have negative returns YTD.
Then there’s the debt deal. A deal has been struck but still needs to be approved by Congress. We’ll see what happens. There may be a relief rally if the deal is approved. But there’s still inflation, the Fed, and a possible recession to worry about beyond that. The market has already rallied 20% from the October lows and it is unlikely to rally much further until there is more clarity on those issues.
Technology seems to be on its own schedule. The sector led the selloff last year and is rebounding before the rest of the market. It was already the best-performing sector on the market this year before last week because of falling inflation and interest rates.
Although the more defensive sectors in utilities, healthcare, and consumer staples have struggled so far this year, they are still a good bet to make up for lost time as the market grapples with unresolved problems. The huge bounce in certain technology stocks is certainly the story right now. But the safer income stocks are likely to be king for the remainder of the year.
Past Month Activity
May 16th
ONEOK Inc. (OKE) – Rating change “BUY” to “HOLD”
May 19th
OKE May 19th $65 calls at $2.70 – Expired
May 23rd
Sold BIPC July 21st $45 calls at $3.25
Brookfield Infrastructure Corporation (BIPC) – Rating change “BUY” to “HOLD”
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.3%
The infrastructure company is up over 10% this month while the market is slightly negative over the same period. 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. BIPC did pull back a couple of days last week when the overall market sold off. But the stock has since regained its footing and moved back higher. It is around the top of the recent range and the market will likely dictate near-term performance. HOLD
Global Ship Lease, Inc. (GSL)
Yield: 8.3%
The container shipping company stock got a bump from another good earnings report after a sharp pullback from the April high. 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 stock has pulled back again as 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: 1.8%
Nvidia (NVDA) rocked the market with blowout earnings and Intel got left behind. Nvidia blew away earnings expectations and guided higher because of incredible demand for its AI (artificial intelligence) chips as companies embrace the unfolding technology at a fever pitch. The stock soared 24% and took several other chip stocks with it, but not Intel, which fell 7% on the day of the announcement. What gives?
Intel doesn’t really have a competitive AI chip. There’s one in the works. But it isn’t expected to launch until 2025. While analysts are upgrading the profit projections of other tech companies, Intel’s expectations are not changing for this year and next. It’s a bad relative comparison in the near term. But INTC has bounced back and regained much of what it lost. HOLD
NextEra Energy, Inc. (NEE)
Yield: 2.5%
This combination regulated and clean energy utility stock has bounced around all 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 more than 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 also well positioned as a defensive stock with growth in a highly uncertain market. BUY
ONEOK, Inc. (OKE)
Yield: 6.7%
OKE has at least leveled off and even moved a bit higher after the selloff following the announcement of its purchase of 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. 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. HOLD
Star Bulk Carriers Corp. (SBLK)
Yield: 21.3%
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. HOLD
Qualcomm Corp. (QCOM)
Yield: 3.1%
Qualcomm did benefit from all the AI hysteria last week. The stock popped up 8% since last Thursday and over 6% on Friday alone. Qualcomm describes itself as the “on-device AI leader,” as opposed to Nvidia’s data center chips. The company will surely benefit as investment and profits from AI are now likely to soar sooner than previously expected. The company had been reeling from falling smartphone demand. But recent developments indicate that profits beyond handsets are likely to rise sooner. 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: 6.2%
It’s been a crummy year so far for this midstream energy company stock. It’s down over 11% YTD. This year has not been kind to defensive stocks or energy stocks so far. But there’s also natural gas. Prices have fallen largely because of the unusually warm winter temperatures throughout the country and the world. Anything natural gas-related gets neglected. 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 growing. BUY
Existing Call Trades
Sell V June 2nd $230 calls at $10.50 or better
This one might be close. Expiration is Friday and V is about 5 per share below the strike price. Much will depend on how the overall market does. But either way, we will get a high income and a chance to sell more calls in the future or a solid total return if shares are called.
Sell BIPC July 21st $45 calls at $3.25 or better
Shares pulled back after the day of the monthly issue. If you didn’t sell the calls on that day, you still would have gotten the target price, or better, at the end of the week. It’s still a good time to sell these calls if you haven’t done so already as a way to generate a high income in a highly uncertain 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 | $110.35 | NA | 2.90% | -14.66% |
| Visa Inc. | V | 12/22/21 | $217.96 | $225.01 | NA | 0.80% | 4.44% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $18.04 | NA | 8.31% | -20.21% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $17.80 | NA | 21.35% | -34.40% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $29.00 | NA | 1.82% | -34.40% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $28.75 | $38.00 | 6.23% | -15.78% |
| Brookfield Infrastructure Cp. | BIPC | 11/9/22 | $42.43 | $47.02 | $46.00 | 3.32% | 12.67% |
| ONEOK Inc. | OKE | 3/28/23 | $60.98 | $57.30 | NA | 6.67% | -4.66% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $73.92 | $85.00 | 2.53% | -4.41% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| V $230 June 2nd call | V 230602C00230000 | Sell | 4/21/23 | $10.50 | $5.27 | $10.50 | 4.82% |
| BIPC $45 July 21st call | BIPC230721C00045000 | Sell | 5/23/23 | $3.25 | $3.64 | $3.25 | 7.66% |
| as of close on 5/26/2023 | |||||||
| 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 | 9/1/21 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24/21 | $2.30 | 11/19.2021 | $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 | 7/20/22 | $11.75 | 9/16/22 | 11.75 | 8.73% | |
| V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/203 | $12.00 | 5.51% | |
| OKE May 19th $65 call | out-of-money | 4/11/23 | $2.70 | 5/19/23 | $2.70 | 4.43% | |