Headlines Drive the Market Sideways
As I mentioned in the last update, last week was a big week for the market. Important earnings, the Fed meeting, and the jobs report all had implications for the near-term direction of the market. The market survived and came away about even for the week. Now what?
Earnings were generally positive. The Fed did what was expected by raising 0.25%, and the statements afterward were ambiguous. The employment report was solid as many more jobs were created. Also, the last two months of jobs figures were lowered. The readjustment quelled inflation fears while the current jobs report indicated no recession in sight.
The market still doesn’t know whether to worry about a recession or inflation and the Fed. Perhaps this week’s April inflation numbers will provide more clarity. But I’m not so sure. It looks like the market may just continue to bounce around with no pronounced direction.
In past cycles, there was a sharp downside and a rapid recovery. But it might be different this time around. We may never get another big selloff or a new low. But the recovery might be lame. The Fed is unlikely to juice the market by lowering rates to zero and leaving them there like in past cycles. We might go sideways for a while. And stagflation is a growing possibility.
But that kind of market works for income. We can add stocks that pay a high dividend income and then take advantage of the market’s ups and downs by selling calls at the top of the range.
Trades This Month
April 11th
SOLD OKE May 19th $65 calls at $2.70
April 18th
SOLD V June 2nd $230 calls at $10.50
April 25th
Purchased NextEra Energy (NEE) - $77.82
Portfolio Recap
Brookfield Infrastructure Corporation (BIPC)
Yield: 3.5%
The infrastructure company reported a solid earnings quarter last week 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. The stock got a solid bump from the report. The stock is now right around the midpoint of its 52-week price range and should be a solid holding amid inflation and/or recession. BUY
Global Ship Lease, Inc. (GSL)
Yield: 8.4%
The container shipping company is solid with growing earnings and revenues even though shipping rates have plunged since the supply chain crisis of a couple of years ago. Global reports earnings later this week and may well get a bump, like it did last quarter. The rate environment is improving as China has reopened and the longer-term supply/demand dynamic for shippers is solid, and the sector is likely in a secular bull market. The stock tends to move higher until recession fears take center stage, then it pulls back. HOLD
Intel Corp. (INTC)
Yield: 1.6%
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: 2.5%
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. 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
ONEOK, Inc. (OKE)
Yield: 5.9%
The midstream energy company reported another stellar earnings quarter last week. Recent acquisitions are boosting the top and bottom lines and natural gas processing volumes were solidly higher across the board. Adjusted EBITDA rose 98% over last year’s quarter and earnings per share grew to 2.34 from 0.87. The company also received a credit rating upgrade. OKE continues to post strong results and is well-suited to endure inflation and/or recession. BUY
Star Bulk Carriers Corp. (SBLK)
Yield: 19.9%
Like GSL, SBLK had gotten new life this year. The stock was significantly higher YTD until the recent pullback. Now it’s about even for the year. The company 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. But the shipping stocks pull back where recession fears dominate the market. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.8%
The chipmaker posted mixed earnings results that the market hated last week. 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. 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. But we’ll see if it can recover somewhat in 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. HOLD
The Williams Companies, Inc. (WMB)
Yield: 5.9%
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. After returning over 30% in 2022, WMB is down YTD and more than 40% below the all-time high despite having higher earnings now.
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. Demand for the fuel has been far less than anticipated and stockpiles have built up. 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 stock should have the right stuff for inflation and or recession, but it has been very bouncy. The portfolio has already sold four calls on this same stock on earlier occasions, and it can provide an excellent vehicle for high income going forward as well. The stock has spiked in price in a very uncertain market, and it made sense to seize the opportunity to sell a call.
Sell V June 2nd $230 calls at $10.50 or better
Visa is looking good after the impressive earnings report. It is still hovering above the 130 per share strike price. But this is a make-or-break week for the market. If the market sells lower in the next month, it will probably take V with it, at least to some extent. It is still a good trade to bank a call premium when a stock is at the high end of the recent range in an 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 | $108.78 | NA | 2.94% | -15.87% |
| Visa Inc. | V | 12/22/21 | $217.96 | $231.78 | NA | 0.78% | 7.37% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $17.81 | NA | 8.42% | -22.82% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $18.81 | NA | 19.94% | -30.68% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $30.99 | NA | 1.63% | -19.75% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $30.18 | $38.00 | 5.93% | -11.59% |
| Brookfield Infrastructure Cp. | BIPC | 11/9/22 | $42.43 | $43.33 | $46.00 | 3.53% | 3.82% |
| ONEOK Inc. | OKE | 3/28/23 | $60.98 | $64.51 | $63.00 | 5.92% | 7.33% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $75.51 | $85.00 | 2.48% | -2.97% |
| 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 | $1.00 | $2.70 | 4.43% |
| V $230 June 2nd call | V 230602C00230000 | Sell | 4/21/23 | $10.50 | $6.18 | $10.50 | 4.82% |
| as of close on 5/05/2023 | |||||||
| 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./01/2021 | $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% | |
| V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/203 | $12.00 | 5.51% | |