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Income Advisor
Conservative investing. Double-digit income.

August 3, 2022

What a July! The S&P 500 moved 9.1% higher for the month, making it the best month since the first pandemic recovery month in 2020. It also closed up 12.6% from the low in June.
Is this a bear market rally or the beginning of something beautiful?

Bear Market Rally or New Bull Market?
What a July! The S&P 500 moved 9.1% higher for the month, making it the best month since the first pandemic recovery month in 2020. It also closed up 12.6% from the low in June.

Is this a bear market rally or the beginning of something beautiful?

That’s the billion-dollar question. A 12.6% move from the lows is more than just a bounce. It’s a serious rally that reflects investors seeing a light at the end of this tunnel. The market tends to anticipate six months or so into the future. By then, it sees the hope that the Fed is done tightening and inflation is under control.

I’m not so sure. Much can go wrong with that rosy scenario. Inflation still isn’t under control even with lower gas prices. The economy is likely already in a recession that could get worse or last longer than the market is anticipating. I hope things get brighter soon, but this portfolio will still plan on more trouble ahead.

It’s a great time to enhance income return by selling covered calls. The market is still highly uncertain, but income is money in the bank. Our latest targeted call on portfolio position Qualcomm (QCOM) provided a huge 8.73% premium on the original purchase price. The calls were in-the-money (at a strike price below the market price) when sold because of the high level of uncertainty in this market and the stock has since pulled back to near the strike price.

Trades This Past Month
July 15th
SBLK July 15th $34 calls at $1.60– Expired

July 20th
Sell QCOM Sep 16th $145 calls at $11.75

July 27th
Purchased Intel Corporation (INTC) - $40.18

August 3rd
Intel (INTC) – Rating change “BUY” to “HOLD”

Portfolio Recap
Global Ship Lease, Inc. (GSL)
Yield 7.5%
GSL is roaring back. The stock is up over 30% from the low in just a little over two weeks. A big part of that in the “risk-on” trade that has been pervasive in the market. The container shipping company also reports earnings this week that could lift or depress the price from here. Expectations are for 166% earnings growth and 73% revenue growth from last year’s quarter. That’s because Global has hugely expanded its fleet over the past year. The market will be looking for forward-looking statements and what the company is expecting in term of rates and demand going forward. HOLD

Intel Corp. (INTC)
Yield 4.0%
The chip maker reported earnings last week that were a disaster. Both revenues and earnings were well below expectations where revenue dropped 22% and earnings came in at an $0.11 per share loss versus and expected $0.69 profit. Intel also lowered guidance for 2022. The company blamed supply chains, China, and its own execution.

This year was always going to be bad. That’s why the stock was so low. The main attraction was the longer term and the cheap price as the company refocused on the foundry business and technology. Last week, the near term got even worse while the longer-term outlook may have improved. The new CHIPS Act will likely provide generous subsidies for its foundry business expansion. We’ll see if the stock continues to get a bounce. But the rating is reduced to HOLD for now. HOLD

Yield 6.3%
This midstream energy stock has fallen well off the highs over the last few months. The red-hot energy sector got cold as a near term recession became more likely and energy price have fallen. But OKE is not dependent on commodity prices but rather volumes of natural gas through its systems. Those volumes are likely to remain strong amidst continuing global supply strains. This stock has growing earnings, a cheap valuation, and a sky-high dividend that is rock solid. OKE should be a relatively good place to be over the rest of the year no matter how things shake out. BUY

One Liberty Properties, Inc. (OLP)
Yield 6.4%
This diversified industrial REIT has also gotten a bounce, up 10% in the last couple of weeks. As a more cyclical REIT, it had been under more pressure than the REIT sector as the market shunned cyclical stocks in a slowing economy. But OLP has rallied along with cyclical plays over the last couple of weeks as investors see an end to this Fed cycle and the “risk-on” trade has been hot. Earnings will be out later this week or early next week. Hopefully OLP will get a further bump. HOLD

Star Bulk Carriers Corp. (SBLK)
Yield 21.5%
SBLK has been soaring this past month, up 27% from the low. The stock got pulverized in the cyclical sell-off following growing calls for a recession in June. The stock is at a bargain price and is an incredible income generator, especially with the call premium. The supply/demand dynamic remains strong for these shippers and rates will likely remain well above the levels of the last decade in the years ahead. We are likely in a secular bull market for shipping. The company reports earnings later this week. HOLD

Qualcomm Corp. (QCOM)
Yield 2.0%
The chip maker stock fell as much as 6.8% after its earnings report last week and is still down over 5% since the day before the announcement. The quarter beat expectations on 36% higher revenues and 54% higher earnings than last year’s quarter as smartphone royalties soured 59% in the quarter. But the company lowered guidance for next quarter and the rest of the year as slowing global growth is expected to reduce handset sales. The market didn’t like that.

The likelihood of slowing phone sales has pressured this stock lower for most of the year. That’s why QCOM is still 25% off the high even after the recent surge. But those slower sales haven’t even materialized yet, and the company still expects 23% year-over-year revenue growth for the rest of the year. It should also benefit as 5G gets applied to many more devices. Slower sales were already more than priced into the stock. Meanwhile, it sells at just 12 times forward earnings with better than 20% growth ahead. BUY

Visa Inc. (V)
Yield 0.7%
Visa reported earnings earlier last week that again knocked it out of the park. It beat expectations on both earnings and revenues, which were up 33% and 19%, respectively. The company continues to benefit from increased global business from the ending of Covid restrictions. The very profitable cross-border transactions soared above pre-pandemic levels this quarter. But the stock has moved lower since the announcement on news of a pending bill in the Senate that will limit credit card fees. We’ll see what the bill looks like and gauge the chances of passage. In the meantime, business is still booming despite inflation and recession. HOLD

Existing Covered Call Trades
Sold QCOM Sep 16 $145 calls at $11.75 or better
The stock has been on a tear but has pulled back since last week’s earnings report. The calls are now selling below the target price and the stock is again close to the strike price. Calls were targeted in-the-money at a strike price below the then market price because this is an unforgiving and unpredictable market. It’s a massive premium with an 8.73% return on the purchase price. It should be a great trade unless the stock runs away from here.

Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
Qualcomm Inc.QCOM5/5/21$134.65$147.43$140.002.07%12.03%
One Liberty PropertiesOLP7/28/21$30.37$28.05NA6.49%-1.89%
Visa Inc.V12/22/21$217.96$211.36NA0.71%-2.68%
Global Ship Lease, Inc.GSL2/23/22$24.96$19.92NA7.53%-18.87%
ONEOK, Inc.OKE5/25/22$65.14$59.12$67.006.26%-7.82%
Star Buld Carriers Corp.SBLK6/1/22$33.30$27.00NA21.52%-14.64%
Intel CorporationINTC7/27/22$40.18$36.96$42.003.95%-8.01%
Open RecommendationsTicker SymbolInitial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
QCOM Sep 16th $145 callQCOM220916c00145000Sell7/20/22$11.75$8.90$11.758.73%
as of close on 8/01/2022
SecurityTicker Symbol ActionEntry DateEntry PriceSale DateSale PriceTotal Return
Innovative Industrial Props.IIPRCalled6/2/20$87.829/18/20$100.0015.08%
U.S. BancorpUSBCalled7/22/20$36.269/18/20$383.42%
Brookfield Infras. Ptnrs.BIPCalled6/24/20$41.9210/16/20$458.49%
Starbucks Corp.SBUXCalled8/26/20$82.4110/16/20$886.18%
Visa CorporationVCalled9/22/20$200.5611/20/20$2000.00%
AbbVie Inc.ABBVCalled6/2/20$91.0412/31/20$10012.43%
Enterprise Prod. Prtnrs.EPDCalled6/24/20$18.141/15/21$2015.16%
Altria GroupMOCalled6/2/20$39.661/15/21$407.31%
U.S. BancorpUSBCalled11/25/20$44.681/15/21$451.66%
B&G Foods Inc,BGSCalled10/28/20$26.792/19/21$284.42%
Valero Energy Inc.VLOCalled8/26/20$53.703/26/21$6011.73%
Chevron Corp.CVXCalled12/23/20$85.694/1/21$9612.95%
KKR & Co.KKRCalled3/24/21$47.986/18/21$5514.92%
Digital Realty TrustDLRCalled1/27/21$149.177/16/21$1555.50%
NextEra Energy, Inc.NEECalled2/24/21$73.769/17/21$8010.00%
Brookfield Infras. Ptnrs.BIPCalled1/13/21$50.6310/15/21$5511.65%
AGNC Investment CorpAGNCSold1/13/21$15.521/19/22$155.92%
ONEOK, Inc.OKECalled5/26/21$52.512/18/22$6019.62%
KKR & Co.KKRSold8/25/21$64.522/23/22$58-9.73%
Valero Energy Inc.VLOCalled11/17/21$73.452/25/22$8315.53%
U.S BancorpUSBSold3/24/21$53.474/13/22$51-1.59%
Enterprise Product PtnrsEPDCalled3/17/21$23.214/14.2022$2411.25%
FS KKR Capital Corp.FSKCalled10/27/21$22.014/14/22$2313.58%
Xcel Energy Inc.XELCalled10/12/21$63.005/20/22$7012.66%
Innovative Industrial Props.IIPRSold3/23/22$196.317/20/22$93-51.23%
SecurityIn/out moneySell DateSell PriceExp. Date$ returnTotal % Return
IIPR Jul 17 $95 callout-of money6/3/20$3.007/17/20$3.003.40%
MO Jul 31 $42 callout-of-money6/17/20$1.607/31/20$1.604.03%
ABBV Sep 18 $100 callout-of-money7/15/20$4.609/18/20$4.605.05%
IIPR Sep 18 $100 callin-the-money7/22/20$5.009/18/20$5.005.69%
QCOM Sep 18 $95 callin-the-money6/24/20$4.309/18/20$4.304.82%
USB Sep 18 $37.50 callin-the-money7/22/20$2.009/18/20$2.005.52%
BIP Oct 16 $45 callin-the-money9/2/20$1.9510/16/20$1.954.65%
SBUX Oct 16 $87.50 callin-the-money10/16/20$3.3010/16/20$3.304.00%
V Nov 20 $200 callin-the-money9/22/20$10.0011/20/20$10.004.99%
ABBV Dec 31 $100 callin-the-money11/18/20$3.3012/31/20$3.303.62%
EPD Jan 15 $20 callin-the-money11/23/20$0.801/15/21$0.804.41%
MO Jan 15 $40 callin-the-money11/25/20$1.901/15/21$1.904.79%
USB Jan 15 $45 callin-the-money11/25/20$2.001/15/21$2.004.48%
BGS Feb 19 $27.50 callin-the-money12/11/20$2.402/19/21$2.408.96%
VLO Mar 26 $60 callin-the-money2/10/21$6.503/26/21$6.5012.10%
CVX Apr 1 $95.50 callin-the-money2/19/21$4.304/1/21$4.305.02%
AGNC Jun 18 $17 callout-of-money4/13/21$0.506/18/21$0.503.21%
KKR Jun 18 $55 callin-the-money4/28/21$3.006/18/21$3.006.25%
USB Jun 16 $57.50 callout-of-money4/28/21$2.806/18/21$2.805.24%
DLR Jul 16 $155 callin-the-money6/16/21$8.007/16/21$8.005.36%
AGNC Aug 20 $17 callout-of-money6/23/21$0.508/20/21$0.503.00%
OKE Aug 20 $57.50 callout-of-money6/23/21$3.508/20/21$3.506.67%
NEE Sep 17 $80 callin-the-money8/11/21$3.509/17/21$3.504.75%
BIP Oct 15 $55 callin-the-money9./01/2021$2.0010/15/21$2.003.95%
USB Nov 19 $60 callout-of-money9/24.2021$2.3011/19.2021$2.304.30%
OKE Nov 26 $65 callout-of-money10/20/21$2.2511/26/21$2.254.28%
KKR Dec 17 $75 callout-of-money10/26/21$3.5012/17/21$3.505.42%
QCOM Jan 21 $185 Callout-of-money11/30/21$9.651/21/22$9.657.17%
OLP Feb 18 $35 Callout-of-money11/19/21$1.502/18/22$1.504.94%
OKE Feb 18 $60 Callin-the-money1/5/22$2.752/18/22$2.755.24%
USB Feb 25 $61 callout-of-money1/13/22$2.502/25/22$2.504.68%
VLO Feb 25 $83 callin-the-money1/18/22$4.202/25/22$4.206.13%
EPD Apr 14th $24 callin-the-money3/2/22$1.254/14/22$1.255.69%
FSK Apr 14th $22.50 callin-the-money3/10/22$0.904/14/22$0.904.09%
XEL May 20th $70 callin-the-money3/30/22$3.005/20/22$3.004.76%
SBLK July 15th $134 callout-of-money6/1/22$1.607/15/22$1.604.80%