Get a High Income While the Getting Is Good
The market is starting this week higher on optimism about a “soft landing.” But the CPI inflation number for August that comes out on Wednesday could derail or support the rally.
Things seem upbeat Monday morning. Treasury Secretary Janet Yellen said on Sunday that she is “feeling very good” about avoiding a recession while still reining in prices. Of course, she called inflation “transitory” in early 2021. There were also some encouraging numbers about the Chinese economy. Also, the Fed is widely expected not to raise the Fed Funds rate later this month.
The CPI number is expected to bump a little higher to 3.6% for August while core CPI is forecast to grow to 4.3%. If the number is in line or lower, the market should be happy. But a higher-than-expected number could spook the market and reignite fears that the Fed will raise rates later this month at the next meeting.
The market has successfully threaded the needle so far with inflation falling in a still-strong economy. Hopefully, that situation continues this fall. But if either inflation or the economy sours, it could spoil the party. Anything can happen.
This newsletter is taking a more cautious income-oriented approach. As certain positions make new 52-week highs in a solid market it makes sense to use the opportunity to get high-priced call premiums and lock in a high total return if the stocks are called. That way we hedge our bets by getting a great income that can compensate if the market turns south while having stock positions that will benefit if the market rallies.
Two new covered calls hit the targeted buy price last week, energy exploration and production company Hess Incorporated (HES) and previously beleaguered technology stalwart Intel (INTC).
Past Month Activity
August 18th
V August 18th $235 calls at $9.00 – Expired
GSL August 18th $20 calls at $1.25 – Expired
Visa Inc. (V) stock – Called
August 22nd
Purchased Xcel Energy Inc. (XEL) - $57.95
Sell HES October 20th $155 calls at $9.00 or better
August 29th
Sold Global Ship Leasing (GSL) - $19.11
September 5th
Sell DLR October 20th $130 calls at $6.00 or better
Sell INTC October 20th $35 calls at $3.00 or better
September 8th
SOLD HES October 20th $155 calls at $9.00
SOLD INTC October 20th $35 calls at $3.76
Portfolio Recap
AbbVie Inc. (ABBV)
Yield: 4.0%
The cutting-edge biopharmaceutical company stock has leveled off after a sharp rise from the bottom in July. I like the way the healthcare sector is set up ahead of a slowing economy and perhaps a further correction in the market in the fall. Meanwhile, AbbVie reported earnings that beat on both earnings and revenue and raised guidance for the year. The report emboldens the notion that the revenue drop from the Humira patent expiration will be temporary and AbbVie will turn the corner sooner than expected. BUY
Digital Realty Trust (DLR)
Yield: 3.7%
This data center REIT has been firing on all cylinders. DLR even moved steadily higher in the down market of August and hit a new 52-week high last week. Digital reported better-than-expected earnings because of strong data center demand and solid growth. Even more importantly, the company assuaged fears that had driven the stock price down earlier this year by executing capital recycling plans that raised over $2 billion by selling joint venture assets. But DLR appears to be leveling off and the stock may be out of gas for this late spike higher. We’ll see. BUY
Hess Corporation (HES)
Yield: 1.1%
After pulling back from the July rally for most of August, the exploration and production company has again found legs and moved to a new 52-week high last week. As an exploration and production company, Hess is highly levered to energy prices, and prices reached the highest level since last fall. Many are predicting further increases as global production has been cut and U.S. inventories are low amid high demand. The target call price was finally reached after a couple of weeks last Friday. BUY
Intel Corp, (INTC)
Yield: 1.4%
After another strong week, INTC is now up over 44% YTD. The company had a terrible last few years as competitors surpassed them and they had manufacturing problems. But Intel has invested heavily in future chips in high-growth areas and is launching a serious foundry business. The future could be bright, and investors seem to be warming to the still-cheap stock. The stock is higher recently because the company raised third-quarter earnings guidance and received a prepayment from a “large unnamed customer” to secure capacity at its foundry for producing semiconductors. It demonstrates the tangible viability of the company’s foundry plans and makes success and higher revenues for the business likely to come sooner. BUY
NextEra Energy, Inc. (NEE)
Yield: 2.8%
The weakness continues. This stock is still wallowing near a multi-year low. But this is a historically superstar performer and the low may already be in. NEE moved above the low last week and may be finally perking investor interest. The utility grew earnings 8.6% in the second quarter and 11% in the first half versus the same periods last year. It also has predictably solid earnings going forward because of a considerable project backlog. It’s a great stock that is just out of favor right now and selling near a multi-year low. BUY
ONEOK, Inc. (OKE)
Yield: 5.9%
Energy has perked up again after a lull following the sector’s spring and summer surge. OKE moved sharply higher in the early summer but has since leveled off. The midstream energy company reported solid earnings and raised earnings guidance for the year. We’ll see if OKE can resume the upside rally in light of renewed energy sector strength. Longer term the stock looks solid as the company is expected to grow revenue by an average of 10% per year over the next three years. HOLD
Realty Income Corp. (O)
Yield: 5.5%
The legendary, defensive income stock is in the same boat as NEE right now. Defensive stocks have been shunned by the market. Even though 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 is wallowing near the 52-week low. This is now a very cheap and high-yielding stock with an excellent historical track record in a very uncertain market and economy. BUY
Qualcomm Corp. (QCOM)
Yield: 2.8%
The chipmaker stock slumped again last week on news that the Chinese government is forbidding government employees from using Apple (AAPL) phones. But QCOM is overcoming some of that selloff after signing a deal with Apple to provide smartphone chips through 2026. There was concern that Apple’s competing chip would replace Qualcomm’s and the company would lose that revenue. But now that won’t happen for at least a few more years. That’s a major concern to get out of the way. Also, Smartphone sales have been hurting but may have bottomed. BUY
The Williams Companies, Inc. (WMB)
Yield: 5.3%
The midstream energy company stock moved sharply higher in the summer until leveling off around the middle of August. Perhaps the recent strength in the more commodity price-sensitive energy stock can reignite further upside from here. Earnings were solid and recent expansion and acquisition activity bodes well for growth in 2023 and 2024 beyond what was expected. BUY
Xcel Energy Inc. (XEL)
Yield: 3.7%
This clean energy utility hasn’t fared any better than NEE in a very tough market for utilities. XEL has been trending lower since the beginning of April and is wallowing near the 52-week low. But things change, and XEL is cheap and one of the best utility stocks to own. These are dark days for utilities. But things always change and XEL and NEE are selling at 52-week lows in an expensive market and ahead of a likely slowing economy. BUY
Existing Call Trades
Sell OKE Sep 15th $65 calls at $3.20 or better
These options expire on Friday and OKE is right on the cusp. The stock is currently trading right around the 65 strike price. It could go either way. The stock could be called or the options could expire worthless. Either way, we have secured yet another round of great income from this stock and possibly a solid total return if OKE gets called.
Sell HES October 20th $155 calls at $9.00 or better
The call premium finally reached the targeted price on Friday, a couple weeks after it was first targeted. The calls have started this week selling above the 9 per call target price and are worth selling if you haven’t already. We are set up for a great income and total return no matter what happens in the next five-plus weeks. Much will depend on what oil prices do over that time.
Sell INTC October 20th $35 calls at $3.50 or better
These calls hit the targeted price on Friday after being targeted at $3 per call earlier last week. The option price closed below $3 per call on Thursday but then opened at $3.84 per call on Friday and closed the day at $3.76. The $3.76 price is what will be used even though the calls were targeted at $3 (or better) because you could have gotten a lower price.
Sell DLR October 20th $130 calls at $6.00 - Pending
These calls have not hit the target price since the “Trade Alert” last Tuesday. The stock has floundered, and these calls are selling below $5 per call to start the week. As we’ve seen with the two calls above, patience can pay off and we will leave that $6 targeted price for now.
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 | $106.14 | $130.00 | 3.01% | -16.75% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $38.01 | $35.00 | 1.31% | -1.22% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $33.82 | $38.00 | 5.29% | 1.86% |
| ONEOK Inc. | OKE | 3/28/23 | $60.98 | $64.77 | NA | 5.90% | 9.30% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $66.83 | $85.00 | 2.80% | -12.98% |
| Hess Corporation | HES | 6/6/23 | $132.25 | $160.52 | $140.00 | 1.09% | 21.77% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $55.32 | $62.00 | 5.54% | -6.89% |
| Digital Realty Trust | DLR | 7/18/23 | $117.31 | $129.98 | $125.00 | 3.75% | 10.80% |
| AbbVie Inc. | ABBV | 7/25/23 | $141.63 | $149.02 | $150.00 | 3.97% | 5.22% |
| Xcel Energy Inc. | XEL | 8/22/23 | $57.95 | $57.07 | $65.00 | 3.64% | -1.52% |
Existing Call Trades | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| OKE $65 Sep 15th call | OKE230915C00060000 | Sell | 7/25/23 | $3.20 | $0.50 | $3.20 | 4.92% |
| DLR $130 Oct 20th call | DLR231020C00130000 | Sell Pending | $4.40 | $6.00 | |||
| INTC $35 Oct 20th call | INTC231020C00035000 | Sell | 9/8/23 | $3.78 | $3.78 | $3.00 | 9.41% |
| HES $155 Oct 20th call | HES231020C00155000 | Sell | 9/8/23 | $9.00 | $9.60 | $9.00 | 6.81% |
| as of close on 9/08/2023 | |||||||
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% |
| 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% |
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% | |
| 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% | |