Recession Blues
The first half results are in. The S&P 500 has had the worst first half since 1970. Not good.
All year long the market has grappled with the strong possibility that the Fed will have to induce a recession in order to tame the high and persistent inflation. There had been hope that a recession might be avoided. But recent evidence is indicating the recession scenario.
The market is pricing in a recession that may still not happen. But the sooner stocks price in a recession, the sooner they can bottom out and start to recover. It’s better to get the selling over with quickly than endure a slow burn over the next six months.
The good news is that bear markets are historically a great time for longer-term investors to buy stocks. The market trends higher over time and buying cheaply in a terrible market can provide the investments of a lifetime. The market is also significantly higher a year after crossing into bear territory.
But things may continue to get worse before they get better. The long-term prognosis improves while near-term fortunes decline. But the majority of the selling is likely over.
There will be some great opportunities in the weeks and months ahead. Stay tuned.
Trades This Past MonthJune 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 9.2%
The long-term prognosis for this container shipping company should be solid. Shipping rates are likely to stay above the levels of last decade in the future because of a beneficial supply/demand dynamic. Shipping rates and shipping stocks are likely in the midst of a secular bull market. But the short term is lousy as recession fears continue to weigh on anything cyclical. The market is already pricing in a recession that may not happen. HOLD
Innovative Industrial Properties, Inc. (IIPR)
Yield 6.3%
Although earning and operational performance will likely remain strong in any economy, IIPR can’t weather a negative stock environment like this. The stock has already been pulverized and I suspect that continued selling pressure in the market from here will likely hurt stocks that have not yet sold off worse than IIPR. The vast majority of the damage is likely done and IIPR should be a lot higher priced than it is now in a year. HOLD
ONEOK, Inc. (OKE)
Yield 6.6%
The bear market selling has taken everything down with it, including OKE. Energy took a huge hit over the past month in panic selling that hit every sector. But the sector is has snapped back because of the extremely profitable near-term environment. Oil and gas prices still have upward price pressures for now, but continued recession fears will temper gains in the sector. OKE is not dependent on commodity prices and is a stable and defensive income generator. There may be more panic selling that takes down OKE in the weeks and possibly months ahead. But this stock is very likely to trade higher six months to a year from now. BUY
One Liberty Properties, Inc. (OLP)
Yield 6.8%
REITs had been in the crosshairs of the recent market tumult. As a cyclical REIT that had a stellar year in 2021, OLP took a big hit. But operational performance at One Liberty remains strong and it remains an amazing dividend payer. But this could morph back into an unforgiving and ugly market. The selling might get worse in the near term. This is a stock that should be a big winner over the next several years but is currently under pressure like just about everything else. HOLD
Star Bulk Carriers Corp. (SBLK)
Yield 23.9%
This dry bulk shipping company stock went ex-dividend a couple days after it was added to the portfolio and buying then entitled you to a massive $1.65 per share payout. Plus, we sold a $1.60 call to boot. But the timing has proven to be unfortunate. Shipping stocks took a huge hit over the past month as global growth was downgraded and shipping rates plunged. Then the market rolled over. Like GSL, the longer term is very solid. But if recession expectations get worse, the stock could fall further. HOLD
Qualcomm Corp. (QCOM)
Yield 2.4%
QCOM didn’t deserve to be dragged down this much. The company is in a huge growth cycle that should last a while. Analysts were slobbering all over this stock just a few months ago and nothing has really changed at the company. The selling in the technology sector is likely overdone. It could get dragged down more in a bad market. But the sector fell before the overall market and could recover first as well. This stock is a good bet to be a lot higher down the road. BUY
Visa Inc. (V)
Yield 0.8%
This company is in the crosshairs of recession talk and a weakening consumer. But the truth is that Visa is getting such a huge benefit from the elimination of covid restrictions globally that the advantage outweighs a global economic slowdown and geopolitical uncertainty. Visa’s 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 15 $34 calls at $1.60 or better
The market and the stock have tanked over the past month and the call price is now a mere $0.12. But the targeted call price was achievable on June 1. 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 | $123.53 | $140.00 | 2.43% | -6.13% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $26.44 | NA | 6.81% | -7.52% |
| Visa Inc. | V | 12/22/21 | $217.96 | $199.18 | NA | 0.75% | -8.29% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $16.24 | NA | 9.24% | -33.86% |
| Innovative Industrial Props. | IIPR | 3/23/22 | $196.31 | $111.94 | NA | 6.25% | -41.58% |
| ONEOK, Inc. | OKE | 5/25/22 | $65.14 | $56.75 | $67.00 | 6.59% | -12.88% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $23.40 | NA | 23.93% | -26.02% |
| 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 | $0.12 | $1.60 | 4.80% |
| As of close on 7.01/2022 | |||||||
| 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% | |