Stocks Face More Risk and Doubt
The sharp recovery from the recent bottom has leveled off, at least for now. From here, the prognosis looks murky at best.
New concerns have arisen. There is worry that Europe will impose additional sanctions on Russia, which may include natural gas. That would certainly increase the negative economic fallout from the war. Also, there is increasing concern about slowing economic growth later this year and next.
I don’t know what will happen with the Russia thing. But I know this war risk isn’t over, even though the initial panic waned. Severe sanctions would likely weaken the global economic outlook and likely our own. That’s a problem. The thing this pandemic recovery always had going for it was a strong economic recovery. Take that away and we face rising interest rates and inflation without a significant offsetting benefit.
The bright spots in this uncertain market are energy and utilities. The energy sector is a whopping 39% higher for the year. And utilities are coming up fast as investors gravitate toward safety.
We sold covered calls on several positions while the getting was still good and locked in a strong income. Meanwhile, the portfolio is still well positioned with mostly solid-performing stocks. But things can change fast.
Trades Past Month
March 10
SOLD FSK April 14 $22.50 calls at $0.90
Purchased Innovative Industrial Properties, Inc. (IIPR) - $196.31
Sell GSL May 20 $30 calls at $2.30 or better- Pending
Sold XEL May 20th call at $3.00
April 6
Sell GSL May 20th $30 calls at $2.30 or better- Remove
Stock Portfolio Recap
Enterprise Product Partners (EPD)
Yield: 7.2%
This midstream energy partnership is hovering right near the 52-week high. It has had a good year in a down market and returned 20% YTD. While that return lags the energy sector this year, EPD is a slower mover because earnings are not levered to energy prices. It may bounce around in the near term, but I like the prospects for the rest of the year. Business is good. It’s still cheaply valued. And that terrific yield is rock solid. (This security generates a K1 form at tax time). HOLD
FS KKR Corp. (FSK)
Yield: 10.9%
This BDC is also within pennies of the 52-week high. It may pull back a bit from the top here, especially if the market gets dicey. But the longer view is more flattering. FSK has returned over 13% YTD and about 27% in the last year, more than double the market return over that period. We’ll see how the market behaves in the next week or two. But we already supplemented that massive income with a covered call. HOLD
Global Ship Lease, Inc. (GSL)
Yield: 5.3%
The container ship company had been a stellar performer both over the last year and YTD is a down market. Container shipping rates remain very high and are likely to stay that way for a while as demand exceeds supply. In fact, the company once again upgraded earnings guidance for the year and the upcoming quarter. But GSL has been crushed so far this week. As of midday on Tuesday, GSL is down 10% in just a day and a half.
There is no company-specific news that is available so far. The likely reason for the plunge is the renewed possibility of increased European sanctions on Russia. The possibility is hurting stocks levered to global trade. GSL had also taken a hit when the war began but recovered strongly after the initial panic waned. I believe the stock will recover from this. But, given the recent move, the targeted calls are being removed. BUY
One Liberty Properties, Inc. (OLP)
Yield: 5.7%
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. HOLD
Qualcomm Corp. (QCOM)
Yield: 1.8%
The smartphone chipmaker stock has been very weak of late, but I am holding on for now. It may have some technical support around the current level. The big cause for concern is slowing smartphone sales in 2023. That will slow the growth rate and the market anticipates. Inflation could also further hurt growth levels next year. But the company anticipated revenue growth of 27% and earnings growth of 39% in 2022 and it still sells at just 14 times earnings. The good should outweigh the bad and we will hold for now. HOLD
U.S. Bancorp (USB)
Yield: 3.5%
Yeah, this regional bank stock has gone sideways for about a year. It should be benefiting from higher rates and spreads. The lack of positive reaction needs to be monitored. Rates are moving higher but there is growing concern for future economic growth amidst inflation and the Fed. We already sold three calls on this position and should get a chance to sell another in the weeks and months ahead if there is not significant further weakness. We will hold for now. HOLD
Visa Inc. (V)
Yield: 0.7%
This global payments company stock is acting much better. V crashed after the initial shock of the Russian invasion as investors soured on anything international. While U.S. business is booming the global recovery was adding another leg to Visa’s recovery. This year looked very promising. It got clobbered but has been moving higher recently as investors recognize V as a good place to bottom fish in the panic phase of the crisis. I expect business to remain strongly growing this year and the stock should take off again if this crisis fades. In the meantime, it’s encouraging that V has held strong amidst the threat of increasing Russian sanctions. HOLD
Xcel Energy Inc. (XEL)
Yield: 2.7%
It’s a new 52-week high. And XEL is within pennies of the all-time high. 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. But it could be near a short-term top. HOLD
Existing Call Trades
Sell EPD April 14th $24 calls at $1.25 or better
EPD looks good. The stock appears to be on track to get back to the 52- week high. And the calls are currently above the target price. But this is a crazy market that could turn south at any time. I like the idea of locking in a big income when the stock is near the high after a rally. The calls are still worth selling at the current price if you haven’t done so already.
Sell FSK April 14th $22.50 calls at $0.90 or better
The story is similar to EPD in that we sold the calls of a stock that is having a good year when it was near the recent high. These calls supplement an already huge income and it’s a good idea to lock in the premiums in this uncertain market.
Sell GSL May 20th $30 calls at $2.30 or better- Remove
The stock went the wrong way, and the calls are way out of the target range. This happens sometimes. The trade is prepared the day before publication and options can move fast. That’s why I specify a price. That’s okay. As I mentioned above, I believe the stock will move higher again. And we’ll get another bite at the apple.
| CIA STOCK PORTFOLIO | |||||||
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Enterprise Product Ptnrs C | EPD C | 3/17/21 | $23.21 | $26.04 | $25.00 | 7.19% | 21.62% |
| U.S. Bancorp | USB | 3/24/21 | $53.47 | $52.66 | $57.00 | 3.48% | 2.40% |
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $153.81 | $140.00 | 1.85% | 16.25% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $31.07 | $33.00 | 5.73% | 6.24% |
| Xcel Energy Inc. | XEL C | 10/12/21 | $63.00 | $72.70 | $67.00 | 2.68% | 17.01% |
| FS KKR Capital Corp. C | FSK C | 10/27/21 | $22.01 | $23.06 | $24.00 | 10.91% | 11.17% |
| Visa Inc. | V | 12/22/21 | $217.96 | $227.74 | $225.00 | 0.66% | 4.66% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $26.48 | $28.00 | 3.51% | 6.09% |
| Innovative Industrial Props. | IIPR | 3/23/22 | $196.31 | $205.24 | $210.00 | 3.41% | 5.44% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| EPD Apr 14th $24 call | EPD220414C00023000 | Sell | 3/2/22 | $1.25 | $2.06 | $1.25 | 5.39% |
| FSK Apr 14th $22.50 call | FSK 220414C00022500 | Sell | 3/10/22 | $0.90 | $0.80 | $0.90 | 4.89% |
| XEL May 20th $70 call | XEL220520C00070000 | Sell | 3/24/22 | $3.00 | $3.74 | $3.00 | 4.76% |
| as of close on 4/04/2022 | |||||||
| 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% |
| 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% | |