Problems Persist
Although it’s already a bear market, there is a good chance that stocks fall to new lows before the market recovers.
The broader S&P 500 hit a low in mid-June on recession fears resulting from persistent high inflation and the Fed’s aggressive actions to tame it. The market has since bounced off the lows, but the issues that drove the market to those lows haven’t really improved.
Inflation hasn’t even peaked. The June Consumer Price Index came in this morning at 9.1%, the highest yet of this cycle and the worst number since November of 1981. The worse-than-expected number means the Fed will likely employ another 0.75% rate hike later this month. Of course, oil and other commodity prices have fallen sharply this month, but that’s only because of fears that inflation and the Fed are driving us towards recession.
It’s a mess that is unlikely to get cleaned up anytime soon. There is a strong chance stocks trend lower from here in the weeks and months ahead in the absence of enough evidence to reverse course and generate lasting upside traction.
Call premiums are low as the fewer investors are willing to bet on higher stock prices in the future. Cyclical stocks remain depressed with a high risk of inflation looming. But there is good news for longer-term investors. Bear market are historically fantastic opportunities to buy stocks cheap ahead of the next bull market. There will be opportunities in the months ahead. Stay tuned.
There is also an opportunity emerging in technology stocks sooner than the rest of the market. That’s why Qualcomm (QCOM) was recently upgraded to a BUY. Look at the bigger picture.
Inflation, the Fed, and recession are all the rage right now. But it could be a much different story in six months. Sectors go in and out of favor. Economic cycles change. Markets go up and down. What won’t change is the fact that we are in a technological revolution where technology will advance more rapidly than before.
The best tech companies will continue to thrive like few others. And investors will come back. Buying companies that will inherit the future at a rare time of weakness in the sector should work well over a reasonable amount of time.
Trades This Past Month
June 15th
Global Ship Lease (GSL) – Rating change “BUY” to “HOLD”
Innovative Industrial Partners (IIPR) – Rating change “BUY” to “HOLD”
One Liberty Properties (OLP) – Rating change “BUY” to “HOLD”
Star Bulk Carriers Corp. (SBLK) – Rating change “BUY” to “HOLD”
June 22nd
Qualcomm (QCOM)– Rating change “HOLD” to “BUY”
Portfolio Recap
Global Ship Lease, Inc. (GSL)
Yield: 9.4%
The company continues to perform well operationally. It’s also operating in an area with a positive supply/demand dynamic and shipping is likely in a secular bull market. But a cyclical international company is in the crosshairs of all this recession talk. We’ll see what happens with the inflation numbers today and the Fed later this month. Hopefully, GSL gets a bounce. HOLD
Innovative Industrial Properties, Inc. (IIPR)
Yield: 6.3%
I know it’s been ugly for this stock. The market is done with unprofitable growth stocks and that has hurt the marijuana sector. But Innovative is still growing at a great clip, projected to grow earnings 37% this year. Meanwhile, it trades at a price/earnings ratio of just 22 and pays a better than 6% yield. The combination of growth and high income is rare indeed. IIPR is definitely a bargain here. It may take a while but this stock should be a lot higher six months or a year from now, and it pays you well to wait. HOLD
ONEOK, Inc. (OKE)
Yield: 6.7%
Even OKE has been brutalized by the recent market. The energy stocks sold off and ended the rally abruptly as recession fears took center stage. But ONEOK is not dependent on commodity prices and is very resilient in any economy, as it continued to grow profits even in the pandemic. It’s a defensive company with a high and safe yield and has inflation built into the contracts. It might just be an ideal place to be over the rest of this year. BUY
One Liberty Properties, Inc. (OLP)
Yield: 7.0%
The operational performance at One Liberty remains strong and it remains a strong dividend payer. But this could morph back into an unforgiving and ugly market. The selling might get worse in the near term. We’ll see if it moves higher, and investors realize the value in a more stable market. HOLD
Star Bulk Carriers Corp. (SBLK)
Yield: 25.2%
Like GSL, SBLK has been under pressure as a cyclical international company amidst the current inflation fears. 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. But if recession expectations get worse, the stock could fall further. HOLD
Qualcomm Corp. (QCOM)
Yield: 2.3%
The company is in a strong earnings growth cycle that should last a while and is also setting up for solid growth in the future. But it’s been an unforgiving market for technology stocks. And the selling could get worse. That said, solid growth in an industry that is only getting bigger and stronger is a winning formula.
Things change. Sectors rotate. The headline risks change. Markets go up and down. But one thing that won’t change is the fact that we are in a technological revolution that is gaining steam, and the right companies will benefit greatly. Picking up a great tech stock at a rare time when the industry is out of favor should work out very well over time. BUY
Visa Inc. (V)
Yield: 0.8%
V got knocked back amidst all this recession talk and the downgrading of global growth projections. But is always seems to bottom in the just under 200 per share range and quickly recovers well when market selling eases. Visa continues to get a huge benefit from the removal of covid restrictions globally despite slowing global growth. Earnings blew away expectations with YOY revenue growth of 25% and 30% earnings growth. This stock should be one of the first to reverse course and move higher when the market recovers. HOLD
Existing Covered Call Trades
Sell SBLK July 15th $34 calls at $1.60 or better
The market and the stock have tanked over the past six weeks; the call price is now a mere 0.05. It seems nearly impossible that the stock will be called at expiration on Friday with the stock selling at just 22.18 per share, well below the 34 strike price. The industry still has a favorable longer-term supply/demand dynamic. In the meantime, we generated a huge income which includes the latest 1.65 dividend and the 1.60 call.
| 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 | $132.95 | $140.00 | 2.27% | 1.03% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $25.88 | NA | 7.02% | -9.48% |
| Visa Inc. | V | 12/22/21 | $217.96 | $204.82 | NA | 0.73% | -5.69% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $15.32 | NA | 9.42% | -37.61% |
| Innovative Industrial Props. | IIPR | 3/23/22 | $196.31 | $110.91 | NA | 6.29% | -42.12% |
| ONEOK, Inc. | OKE | 5/25/22 | $65.14 | $55.00 | $67.00 | 6.70% | -15.57% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $22.18 | NA | 25.25% | -29.88% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| SBLK July 15th $34 call | SBLK220715C00034000 | SELL | 6/1/22 | 1.6 | $0.05 | $1.60 | 4.80% |
| as of close on 7/12/2022 | |||||||
| 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 | 4/13/22 | $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% |
| 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% | |