Earnings Save the Day, for Now
Earnings might be saving this market. That’s the good news. The bad news is that the market needs saving, and for good reasons.
So far, with just about 10% of S&P 500 companies reporting, earnings have been better than expected, as usual. It’s a tough quarter considering inflation, the war, and covid in China. But companies have been resilient so far. And market performance has been upgraded from falling to floundering.
The recent strength is encouraging considering the problems floating around. The war is still raging, and the International Monetary Fund (IMF) has downgraded global growth projections because of the economic fallout. Then there’s inflation and the Fed. An aggressive Fed slowing the economy in order to combat persistent high inflation will be a lingering problem. It will be tough for this market to generate sustained upside traction with that issue looming.
But energy stocks continue to kill it. That sector is up about 50% YTD with no sign of stopping. Utilities have also been strong performers as investors gravitate toward safety and value amidst the uncertainty. It might be a rough year for the market indexes but a much better year for certain sectors.
Options expired last week on two positions: Enterprise Product Partners (EPD) and FS KKR Capital Corp. (FSK). Those stocks showed surprising strength in a tough market. But we still locked in a strong double-digit income from both positions.
Trades Past Month
March 23
Purchased Innovative Industrial Properties, Inc. (IIPR) - $196.31
Sold XEL May 20th $70 call at $3.00
April 6
Sell GSL May 20th $30 calls at $2.30 or better- Removed
April 13
SOLD U.S. Bancorp stock (USB) - $50.61
EPD April 14th $24 calls at $1.25 - Expired
FSK April 14th $22.50 calls at $0.90 - Expired
Enterprise Product Partners (EPD) stock - Called
FS KKR Capital Corp. (FSK) stock - Called
Stock Portfolio Recap
Global Ship Lease, Inc. (GSL)
Yield: 5.9%
This containership company stock plunged over 20% in just ten days earlier this month. But the stock has bounced back sharply in the last couple of weeks and recovered more than 13% from the bottom. The stock got hit initially with fears of increased European sanctions on Russia. Then it got knocked down more on global growth concerns amidst the tightening Fed. But the down move was overdone.
Containerships remain in short supply and high demand and should be resilient going forward even if the global economy slows down. GSL has still returned 13% YTD and 96% over the past year. The company also upgraded earnings guidance for this year. It’s a volatile stock, but conditions remain favorable and good performance should continue. BUY
Innovative Industrial Properties, Inc. (IIPR)
Yield: 3.8%
Oouch! This marijuana farm REIT is down 16% since being added to the portfolio and 37% YTD. This market has been very unforgiving to stocks that were stellar performers last year. Even after being down considerably from the high. IIPR has returned an average of 58% per year over the last five years. That’s because the REIT grew earnings 78% per year over the period.
It’s not slowing down either. Earnings grew 75% in 2021. There is nothing on the horizon that should slow the growth. Sure, stocks and sectors go in and out of favor in the near term. But IIPR pays a huge and growing dividend and continues to grow earnings at a fever clip. This one should come back into favor. And patience should be rewarded. BUY
One Liberty Properties, Inc. (OLP)
Yield: 5.9%
This superior industrial REIT had taken it on the chin earlier this year as the REIT sector struggled. But REITs recovered a bit from the early months of this year. OLP had a good few weeks and rose sharply off the recent low. But it has been wallowing a bit again of late. It’s still a tricky environment but One Liberty still has a strong and growing business. I expect the stock to come back into favor at some point in the months ahead. Perhaps the earnings report in early May will get it going. BUY
Qualcomm Corp. (QCOM)
Yield: 2.2%
This former superstar performer hit the skids and is still wallowing near the recent low, down 25% since the beginning of February. Tech has been under considerable pressure as inflation, rising rates and slower growth put the hurt on future earnings growth projections. The worry with Qualcomm is slowing smartphone sales in 2023. But the company anticipated revenue growth of 27% and earnings growth of 39% in 2022 and it still sells at just 12 times earnings. The good should outweigh the bad, especially considering the stock already got the stuffing kicked out of it. HOLD
Visa Inc. (V)
Yield: 0.7%
This global payments company stock is bouncy but with solid prospects over the course of this year. It had sold off after the initial panic from the Russian invasion but then recovered strongly. Lately it is being hampered by concerns about slowing global growth. But the international business is picking up strongly as covid restrictions have largely been removed. The stock should be resilient in the absence of overwhelming negative developments like a global recession. HOLD
Xcel Energy Inc. (XEL)
Yield: 2.6%
What down market? XEL loves it. The stock has been making a series of new highs over the past several weeks. The reason is that both utility stocks and alternative energy stocks have been strong. Clean energy stocks got a boost as conventional energy prices are going through the roof, and investors are gravitating toward to safety of utilities in this highly uncertain market. I like the stock longer term. We’ll see how high this surge takes it. HOLD
Existing Call Trades
EPD April 14th $24 calls at $1.25 - Expired
Call premium: $1.25
Dividends: $1.82
Total: $3.86 (total return 16.7% in about 13 months)
It would have been nice to keep this one. But the stock has had an unusual run of late as energy stocks are having an epic year for the ages. EPD could pull back again after this surge. And we got a strong income for it and locked in profits in an uncertain market.
EPD April 14th $22.50 calls at $0.90 - Expired
Call premium: $0.90
Dividends: $1.25 (1-4, 4-4)
Appreciation: $0.49 ($22.50 strike price minus $22.01 purchase price
Total: $2.64 (total return 12% in less than 6 months)
The stock has been called at pennies below the current price. FSK held up very well in a tough market. But it’s portfolio of small companies is vulnerable to slowing economic growth. It might turn out to be a good thing to take a profit in FSK at this point. We also got a fantastic income in a short time.
Sell XEL May 20th $70 call at $3.00 or better
The stock is riding high now at more than 5 per share above the strike price. But XEL bounces around a lot and there is still more than a month to go before options expiration. The calls are currently selling at over $4 and are still worth selling if you haven’t done so already.
| 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 | $139.32 | $140.00 | 2.19% | 5.30% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $30.64 | $33.00 | 5.88% | 5.26% |
| Xcel Energy Inc. C | XEL | 10/12/21 | $63.00 | $74.21 | $67.00 | 2.62% | 19.42% |
| Visa Inc. | V | 12/22/21 | $217.96 | $213.17 | $225.00 | 0.70% | -2.04% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $25.63 | $28.00 | 4.03% | 2.68% |
| Innovative Industrial Props. | IIPR | 3/23/22 | $196.31 | $163.10 | $210.00 | 3.82% | -16.21% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| XEL May 20th $70 call | XEL220520C00070000 | Sell | 3/24/22 | $3.00 | $4.68 | $3.00 | 4.76% |
| as of close on 4/18/2022 | |||||||
| 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 | 4/13/21 | $51 | -1.59% |
| Enterprise Product Ptnrs | EPD | Called | 3/17/21 | $23.21 | 4/14.2021 | $24 | 11.25% |
| FS KKR Capital Corp. | FSK | Called | 10/27/21 | $22.01 | 4/14/21 | $23 | 13.58% |
| 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 | 3/2/21 | $1.25 | 4/14/21 | $1.25 | 5.69% | |
| FSK Apr 14th $22.50 call | in-the-money | 3/10/21 | $0.90 | 4/14/21 | $0.90 | 4.09% | |