Optimism Makes a Comeback
The market is rallying this month as the “Goldilocks” scenario gets renewed traction.
The economy is still solid. There are no signs of recession. At the same time, the Fed is making noises like it may be done hiking rates because of the higher longer-term rates. A good earnings season may also buoy stocks.
There is a growing optimism that interest rates may have peaked, and we may yet get through this rate-hiking cycle without the requisite economic pain. The good vibes are back for now and they may be enough to muster an impressive October. But headline risks are growing.
There’s the situation in the Middle East. The market doesn’t seem worried. And Mr. Market is usually right about these things. But there is still a risk that the Israel situation spreads into a wider conflict. Bad news on that front could trump everything else and send the market reeling.
That cloud is probably tempering the current optimism. If this crisis fades without escalating into something that alarms the market, stocks could make up for lost time down the road. In the meantime, the portfolio stocks are rising. We also secured a high income from existing call positions that is locked in even if things turn sour from here. Stay tuned.
Past Month Activity
September 26th
Sell DLR October 20th $130 at $6.00 – Remove
Purchased Tractor Supply Company (TSCO) - $203.03
October 2nd
NextEra Energy (NEE) - Rating change “BUY” to “HOLD”
Portfolio Recap
AbbVie Inc. (ABBV)
Yield: 4.0%
So far, this cutting-edge biopharmaceutical company stock is getting through this challenging year in decent shape. It has returned -5% YTD. But it has been a lot better over the last three months when it has been up about 12%. Healthcare is a good sector to be in when the overall market struggles. Shrinking Humira revenues should be overcome with its strong new drugs and pipeline in the future. If AbbVie can follow last quarter’s positive earnings surprise when it reports later this month, the stock could surge higher as investors sense that it might turn the Humira corner sooner. BUY
Digital Realty Trust (DLR)
Yield: 4.0%
This data center REIT has come nicely off the recent bottom and has had upward momentum for the past two weeks. It retreated in September after making a 52-week high at the end of August. The long-term prognosis is solid because voracious AI spending upgrades should provide another growth catalyst, in addition to a move toward the cloud. It may have started a move toward a new high or it could continue to bounce around in the short term, depending on the overall market. BUY
Hess Corporation (HES)
Yield: 1.1%
The energy exploration and production company stock had been bouncing around with oil prices, which peaked in late September. The company is highly levered to prices because they determine profit margins. But lately, HES has moved higher even though oil prices have leveled off. Part of it is the possibility of a surge in prices if the situation in the Middle East escalates. But it is most likely because the company reports earnings later this month that are likely to be stellar. BUY
Intel Corp. (INTC)
Yield: 1.4%
After a 15% pullback in September, the bleeding has stopped and INTC has been rallying higher in a tough market. The stock had a huge spike higher in the late summer and a pullback after such a move is normal, especially in a lousy market. The fact that INTC is avoiding falling back into the abyss inspires confidence that the stock is cheap ahead of a brighter future and investors are interested. It seems to want to go higher in all but the toughest markets for the overall technology sector. BUY
NextEra Energy, Inc. (NEE)
Yield: 3.4%
This alternative energy utility stock has moved convincingly off the bottom after a disastrous couple of weeks. The already beleaguered stock fell another 27% after its subsidiary, NextEra Energy Partners, LP (NEP), announced that it is cutting the projected distribution growth rate from 12% to around 6%. Investors feared that slower subsidiary growth will negatively affect the parent company’s growth rate despite the fact that NextEra is sticking with its growth projections.
The stock fell near the cheapest valuations ever but then had a convincing 15% move off the low in the past week. The selling is way overdone, even if earnings do decline, and investors are realizing the value. Hopefully, the momentum continues. HOLD
Realty Income Corp. (O)
Yield: 6.1%
This rock solid, legendary income REIT has not lived up to its reputation of late. O just hit a brand-new low that is the lowest price for the REIT since the pandemic bear market more than three years ago. Defensive stocks have been poor performers all year. But operational performance has been sound as earnings were solid with a stellar 99% occupancy rate for its properties and an additional $3.1 billion invested in the quarter in 710 properties. O has moved higher from the low. Maybe a great track record and a 6% dividend can perk enough investor interest to drive the stock higher from here. BUY
Tractor Supply Company (TSCO)
Yield: 2.0%
The farm and ranch retail company stock had been getting slapped around as investors worried about the continued resiliency of the consumer. But Tractor’s rural consumers have already been weak for a while and the company has been successfully compensating with its vast array of staple products. Last quarter, the company delivered 8.5% EPS growth while average S&P 500 earnings were down. The better economic news seems to have revitalized the stock, which has moved nearly 5% higher in the past couple of days. BUY
Qualcomm Corp. (QCOM)
Yield: 2.9%
The chipmaker stock continues to struggle through this year. It has returned just 3% YTD while the technology sector is up over 30% over the same period. The sector is being driven by stocks with exposure to AI that are benefiting right now. It’s a little soon for Qualcomm. The company is highly dependent on smartphones. And sales have been falling as the 5G cycle comes to an end and the global economy is sputtering. But smartphone sales may have bottomed out. The stock sells at a forward PE ratio below 11 times, which is cheap considering the cycle and the growth opportunities in Internet of Things and other AI applications. BUY
The Williams Companies, Inc. (WMB)
Yield: 5.1%
It’s a new 52-week high. Midstream energy companies are dividend stocks that have held up relatively well in the market despite rising interest rates. While other more defensive dividend-paying stocks are struggling, midstream energy companies have been rolling merrily along. It is likely that strength in the more commodity price-sensitive energy stocks is helping the stock. It also operates in an inflation-resistant business and revenues should remain solid even in a slow economy. BUY
Xcel Energy Inc. (XEL)
Yield: 3.5%
The dark days for utilities may be over. The lows may be in. XEL is having a convincing 10% move off the low. This is one of the best utility stocks to own and the recent week’s debauchery may prove to be very temporary. XEL is now selling close to the pandemic bear market lows of three years ago ahead of a likely slowing economy. Even if interest rates do hurt earnings, the damage is already priced into this stock. BUY
Existing Call Trades
Sell HES October 20th $155 calls at $9.00 or better
It looks like these shares will be called at options expiration on Friday. The stock is currently selling at about 7 per share above the strike price. While oil prices have leveled off for now there seems to be optimism about earnings that is driving this stock higher. But we will still secure a great income and a high return in a highly uncertain market.
Sell INTC October 20th $35 calls at $3.50 or better
This stock might be a little more of a horserace between now and Friday expiration as the current stock price is less than 2 per share above the strike price. INTC seems to want to go higher unless the overall tech sector is struggling. But there is a lot of headline risk right now and anything can happen between now and the end of the week.
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 | $108.66 | $130.00 | 2.94% | -14.77% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $35.97 | $35.00 | 1.39% | -6.52% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $35.19 | $38.00 | 5.09% | 5.99% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $54.49 | NA | 3.43% | -29.05% |
| Hess Corporation | HES | 6/6/23 | $132.25 | $160.98 | $140.00 | 1.09% | 22.46% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $50.59 | $62.00 | 6.07% | -14.41% |
| Digital Realty Trust | DLR | 7/18/23 | $117.31 | $122.60 | $125.00 | 3.98% | 5.50% |
| AbbVie Inc. | ABBV | 7/25/23 | $141.63 | $147.96 | $150.00 | 4.00% | 5.51% |
| Xcel Energy Inc. | XEL | 8/22/23 | $57.95 | $58.86 | $65.00 | 3.53% | 2.47% |
| Tractor Supply Company | TSCO | 9/26/23 | $203.03 | $200.75 | $215.00 | 2.05% | -1.13% |
Existing Call Trades | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| INTC $35 Oct 20th call | INTC231020C00035000 | Sell | 9/8/23 | $3.78 | $1.32 | $3.00 | 9.41% |
| HES $155 Oct 20th call | HES231020C00155000 | Sell | 9/8/23 | $9.00 | $7.70 | $9.00 | 6.81% |
| as of close on 10/13/2023 | |||||||
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 | 4/14/22 | $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% |
| Brookfield Infrastructure Cp. | BIPC | Called | 11/9/22 | $42.43 | 7/21/23 | $45 | 8.72% |
| Star Bulk Carriers Corp. | SBLK | Sold | 6/1/22 | $33.30 | 8/8/23 | $18 | -31.38% |
| Visa Inc. | V | Called | 12/22/21 | $217.16 | 8/18/23 | $235 | 9.16% |
| Global Ship Lease, Inc. | GSL | Sold | 2/23/22 | $24.96 | 8/29/23 | $19 | -13.82% |
| ONEOK, Inc. | OKE | Called | 3/28/23 | $60.98 | 9/15/23 | $65 | 9.72% |
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% | |
| 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% | |
| BIPC $45 July 21st call | in-the-money | 5/23/23 | $3.25 | 7/21/23 | $3.25 | 7.66% | |
| V $235 Aug 18th call | in-the-money | 7/11/23 | $9.00 | 8/18/23 | $9.00 | 4.13% | |
| GSL $20 Aug 18th call | out-of-money | 7/11/23 | $1.25 | 8/18/23 | 1.25 | 5.00% | |
| OKE $65 Sep 15 call | in-the-money | 9/15/23 | $3.20 | 7/25/23 | 3.2 | 4.92% | |