The Selling Probably Isn’t Over
The market rallied strongly off the lows last week, moving 6% higher on the week.
Is the bottom in?
I doubt it. The market has behaved this way all year. There has typically been a rally after intense selling and a new low. But stocks have difficulty generating any lasting upside traction in the face of high inflation, an aggressive Fed, and a slowing economy.
The market hit a new low earlier this month on increasing expectations of a recession within the next year. Fears have abated somewhat. But not much. It’s still a distinct possibility. The rally may continue for longer, but a V-shaped recovery still isn’t in the cards. In the best case, it’s a mostly sideways slog from here for the rest of the year. But it is more likely that the market makes new lows.
That said, there is good news for longer-term investors. While the market may get a little worse from here, the bulk of the selling is likely over. Historically, the market has been significantly higher a year after crossing into bear territory. Many stocks have gotten cheap and should be a lot higher a year from now.
There will be great opportunities in the months ahead. But now is not the best time to fight this market.
Trades This Past Month
June 1st
Purchased Star Bulk Carriers Corp. (SBLK) - $33.30
Sold SBLK July 15 $34 calls at $1.60
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 8.4%
The recession anticipation has been a problem for cyclical companies. Shipping stocks also took a big hit when the World Bank and the International Monetary Fund downgraded global growth for this year and next. But slower global growth has been known for months and 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 near term is much more dicey. Right now, recession fears are somewhat receding and cyclical stocks have been recovering. I’ll watch closely from here. HOLD
Innovative Industrial Properties, Inc. (IIPR)
Yield 6.5%
Just when it looked like things wouldn’t get worse for the marijuana farm REIT, they did. IIPR fell more than 10% this past month even though it had been beaten to a pulp already. It’s not a good stock to have in a panicky market, even though fundamentals justify a much higher price. Yet, the company is projected to grow earnings 37% this year and it sells at a price/earnings ratio close to that of the overall market. It also pays a large and rapidly growing dividend. HOLD
ONEOK, Inc. (OKE)
Yield 6.7%
The bear market selling has taken everything down with it, including OKE. Energy took a huge hit over the past few weeks in panic selling that hit every sector. But the sector is snapping back strongly over the past few days. Oil and gas prices still have some upward price pressures in the near term, 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 6.9%
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 it had been trending higher over the past couple of weeks, albeit slowly. 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 22.3%
This dry bulk shipping company was added to the portfolio in the last monthly issue. The urgency was that the stock went ex-dividend a couple days later 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.
It was already known that the global economy was slowing and would grow below previous expectations. But headlines move markets in the near term. 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%
This stock is cheap. The company is killing it not only with massive 5G smartphone royalties but also on future high-growth money makers like auto chips and internet of things (IOT). It didn’t deserve to be dragged down this much. 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 again 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%
We’ll hold this one for now. Remember, Visa is not a credit card company. It’s a payment processing company. Of course, a recession is bad for transaction volumes as consumers tighten their wallets. But as bad as a recession is, Covid was probably worse. Visa continues to get a huge benefit from the removal of Covid restrictions globally. 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 $0.10. 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 | $127.18 | $140.00 | 2.36% | -3.36% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $26.29 | NA | 6.85% | -8.05% |
| Visa Inc. | V | 12/22/21 | $217.96 | $203.56 | NA | 0.79% | -6.27% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $17.81 | NA | 8.42% | -27.24% |
| Innovative Industrial Props. | IIPR | 3/23/22 | $196.31 | $117.32 | NA | 6.46% | -39.73% |
| ONEOK, Inc. | OKE | 5/25/22 | $65.14 | $56.67 | $67.00 | 6.73% | -13.00% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $25.96 | NA | 22.30% | -17.93% |
| 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 | $0.10 | $1.60 | 4.80% |
| As of close on 6/27/2022 | |||||||
| 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% | |