What Virus?
It looks like the market dodged a bullet, at least for now.
Things were going fine and on track for a strong finish to the year. Then the new Omicron virus strain sent the market reeling. But those fears are abating as preliminary information indicates this strain is milder than the previous Delta strain. Markets rallied strongly earlier this week and the indexes are about back to where they were before news of the new strain first came out.
It’s back to the tug-o’-war between Fed tightening and a still booming economy. The economy has out tugged looming problems for about a year and will likely continue to prevail, at least for the rest of the year. Of course, the mild virus narrative could still change. The market usually gets these things right, but we’ll see.
It’s still a better environment in which to sell covered calls than it is to buy new stocks. The market is high priced. Meanwhile, problems like supply-chain shortages and inflation are getting worse while the economic boom may run out of gas in the quarters ahead.
There are currently three outstanding calls in the portfolio for KKR & Co. (KKR), One Liberty Properties (OLP), and Qualcomm (QCOM). The QCOM call may have been tough to get. It was originally targeted at $9.65 in the November issue on November 24th. But it did not hit the price until November 30th, and only for one day. If you could not get the target price, you may get another chance in the days ahead.
Trades past month
November 17th
Purchased Valero Energy (VLO) - $73.25
November 19th
USB November 19th $60 calls at $2.30 - Expired
Sold OLP February 18th $35 calls at $1.50 or better
November 24th
Sell QCOM January 21st $185 calls at $9.65 or better
November 26th
OKE November 26th$65 calls at $2.25 -Expired
November 30th
SOLD QCOM January 21st $185 calls at $9.65
Stock Portfolio Recap
AGNC Investment Corp. (AGNC)
Yield 9.2%
This mortgage REIT had been holding strong around the 16 per share level on the downside. But the recent Omicron virus scare and corresponding drop in the ten-year Treasury yield knocked AGNC below that level. However, as virus fears are abating AGNC has made a beeline back to around 16 per share. Looking forward, a combination of Fed tapering and persistent inflation make it likely that interest rates trend higher in the months ahead. That should be a positive for AGNC. BUY
Enterprise Product Partners (EPD)
Yield 8.5%
I’m losing patience with this one. Over the last year, the price has risen a mere 2.13% compared to a 16.6% rise for the midstream energy index and a whopping 56% gain for ONEOK (OKE), the other midstream energy position in this portfolio. The likely reason for the underperformance is the fact that Enterprise moves a lot of oil, and the market sees that as a dying business over time. ONEOK deals in natural gas and natural gas liquids (NGLs), the most environmentally friendly fossil fuel.
Sure, EPD is a great value. And that massive distribution is quite safe, with 1.6 times coverage in the worst quarter of the pandemic. But the next time EPD gets a move on I’ll be looking to sell an in-the-money call and get more income to make up for lost time. I don’t see getting any less than the yield at this price if you buy it now. BUY
FS KKR Corp. (FSK)
Yield 11.6%
This BDC is still knocking around near the lower point of the recent range. Earnings were solid and FSK continues to benefit from the current environment. Strong economic growth is good for small companies. It only needs to get back up near the higher point of the recent range and there should be a good call writing opportunity. A solid call premium combined with that massive yield should provide a great income. BUY
KKR & Co., Inc. (KKR)
Yield 0.8%
The alternative investment asset manager stock is taking a breather after a huge surge in October. It had been trending lower since early November, but it has been moving higher again in December. Business is booming and I still like the stock going into next year. But I’m not sure how long it will consolidate before moving higher again. We’ll see if the stock gets called when the options expire a week from Friday. The price is currently only about 1.50 per share above the strike price. HOLD
One Liberty Properties, Inc. (OLP)
Yield 5.4%
I like the way this diversified industrial REIT is acting. It got a big boost after a positive earnings report last month. It did pull back somewhat, but it has remained above the pre-earnings levels and it has moved higher in December. We sold the calls at the very high after a nice move. OLP should still stay in this new higher range, but it might take a while before it breaks out even higher. HOLD
ONEOK, Inc. (OKE)
Yield 6.1%
This has been a terrific midstream energy stock that has vastly outperformed its peers. OKE has returned a stellar 73% this year. But the stock is still priced below the pre-pandemic highs despite higher earnings and stronger growth. I expect more good things from this natural gas and natural gas liquids (NGLs) midstream super star. This newsletter has already rung the register with two calls on this position so far, and the price is still about 20% higher than when it was added to the portfolio in late May. HOLD
Qualcomm Corp. (QCOM)
Yield 1.6%
It’s true that this 5G chipmaker stock has leveled off since a huge 40% move higher in a month. It’s still around 5 per share below the high made on November 18th. But it hasn’t lost much at all. And external factors including a tech sector selloff and the Omicron scare have held it down. It still looks like it wants to go higher as soon as external pressures abate. HOLD
U.S. Bancorp (USB)
Yield 3.2%
The regional bank stock kind of got clobbered in the last half of November. The yield curve flattened and then the virus news pulled cyclical stocks down more. USB has been recovering in December so far. Business at the bank is booming and will likely get even better as interest rates likely trend higher. The Fed tapering along with rising inflationary pressure is likely to put upward pressure on rates. It should have some good days ahead. In the meantime, this newsletter has already milked the position for two calls so far. HOLD
Valero Energy Corp. (VLO)
Yield 5.6%
This refiner stock has bounced around since it was added to the portfolio three weeks ago. That’s because the Omicron virus thing spooked the energy sector, which bounced back as virus fears are abating for now. We’ll get those near-term gyrations. But Valero has a lot going for it. Demand for gasoline, diesel and heating oil is very strong and prices likely are not nearly done rising. It will probably take another sustained energy sector rally to get VLO really moving again. But that day should be upon us before long. BUY
Xcel Energy Inc. (XEL)
Yield 2.8%
This alternative energy utility continues to make a sustained, yet choppy, move above the recent low. It is likely the normal range patter will deliver higher prices in the months ahead. Beyond that it should benefit as the economy normalizes after the pandemic recovery. And beyond that, XEL should benefit as alternative energy comes back into vogue. BUY
Existing Call Trades
Sell KKR December 17th $75 calls at $3.50 or better
This stock ran away after we sold the calls in late October. It hit a high of about 84 per share in early November. But the stock has consolidated since. And now, it could be a horse race for these calls. Expiration is in a little over a week and the stock is currently about 2 per share above the strike price. KKR closed below the strike price for seven straight days but has recovered somewhat recently. We’ll see what happens over the next week or so. But either way we’ll secure a great income and/or a high return in a relatively short amount of time.
Sell OLP February 18th $35 calls at $1.50 or better
It took a little over a week after the initial recommendation to get these calls at the targeted price. But this tends to be a slow-moving stock and we were able to lock in a high call premium when the stock was at the high after a surge. The calls still have a long way to go before expiration, but it looks like they were well-timed at this point.
Sell QCOM January 21st $185 calls at $9.65 or better
The calls were targeted a couple of weeks ago in the monthly issue at $9.65. The stock moved lower by the time the issue was available. But the calls price was hit, and subscribers were able to get the targeted price on November 30th. If you couldn’t get the targeted price, it may very well hit it again over the next week.
| CIA STOCK PORTFOLIO | |||||||
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Price on 12/7/21 | Buy at or Under Price | Yield | Total Return |
| AGNC Investment Corp. | AGNC | 1/13/2021 | 15.52 | 15.85 | 17.00 | 9.20% | 10.60% |
| Enterprise Product Partners | EPD | 3/17/2021 | 23.21 | 21.03 | 25.00 | 8.50% | -3.67% |
| U.S. Bancorp | USB | 3/24/21 | 53.47 | 57.69 | 57.00 | 3.23% | 10.35% |
| Qualcomm Inc. | QCOM | 5/5/21 | 134.65 | 183.72 | 140.00 | 1.55% | 38.31% |
| ONEOK, Inc. | OKE | 5/26/21 | 52.51 | 62.68 | 60.00 | 6.14% | 23.30% |
| One Liberty Properties, inc. | OLP | 7/28/21 | 30.37 | 33.78 | 33.00 | 5.42% | 12.85% |
| KKR & Co., Inc. | KKR | 8/25/21 | 64.52 | 77.70 | 70.00 | 0.78% | 20.65% |
| Xcel Energy Inc. | XEL | 10/12/21 | 63.00 | 66.04 | 67.00 | 2.81% | 4.83% |
| FS KKR Capital Corp. | FSK | 10/27/21 | 22.01 | 21.53 | 24.00 | 11.64% | -2.18% |
| Valero Energy Corp. | VLO | 11/17/21 | 73.45 | 71.63 | 85.00 | 5.57% | -1.18% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Price on 12/7/21 | Sell To Price or Better | Total Return |
| KKR Dec 17 $75 call | KKR211217C00080000 | Sell | 10/26/21 | 3.50 | 3.15 | 3.50 | 5.42% |
| OLP Feb 18 $35 call | OLP220218C00035000 | Sell | 11/19/21 | 1.50 | 0.91 | 1.50 | 4.94% |
| QCOM Jan 21 185 call | QCOM220121C00185000 | Sell | 11/30/21 | 9.65 | 8.38 | 9.65 | 7.17% |
| 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 | 38.00 | 3.42% |
| Brookfield Infras. Ptnrs. | BIP | Called | 6/24/20 | 41.92 | 10/16/20 | 45.00 | 8.49% |
| Starbucks Corp. | SBUX | Called | 8/26/20 | 82.41 | 10/16/20 | 88.00 | 6.18% |
| Visa Corporation | V | Called | 9/22/20 | 200.56 | 11/20/20 | 200.00 | 0.00% |
| AbbVie Inc. | ABBV | Called | 6/2/20 | 91.04 | 12/31/20 | 100.00 | 12.43% |
| Enterprise Prod. Prtnrs. | EPD | Called | 6/24/20 | 18.14 | 1/15/21 | 20.00 | 15.16% |
| Altria Group | MO | Called | 6/2/20 | 39.66 | 1/15/21 | 40.00 | 7.31% |
| U.S. Bancorp | USB | Called | 11/25/20 | 44.68 | 1/15/21 | 45.00 | 1.66% |
| B&G Foods Inc, | BGS | Called | 10/28/20 | 26.79 | 2/19/21 | 28.00 | 4.42% |
| Valero Energy Inc. | VLO | Called | 8/26/20 | 53.70 | 3/26/21 | 60.00 | 11.73% |
| Chevron Corp. | CVX | Called | 12/23/20 | 85.69 | 4/1/21 | 96.00 | 12.95% |
| KKR & Co. | KKR | Called | 3/24/21 | 47.98 | 6/18/21 | 55.00 | 14.92% |
| Digital Realty Trust | DLR | Called | 1/27/21 | 149.17 | 7/16/21 | 155.00 | 5.50% |
| NextEra Energy, Inc. | NEE | Called | 2/24/21 | 73.76 | 9/17/21 | 80.00 | 10.00% |
| Brookfield Infras. Ptnrs. | BIP | Called | 1/13/21 | 50.63 | 10/15/21 | 55.00 | 11.65% |
| 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% | |