The Market Shows Some Strength
We’ve been delivered. In just two short weeks the market has gone from a toxic 2022 market sliding toward bear territory to a huge rally that brings back the hope of a mediocre year. Enjoy the high country.
It was ugly two weeks ago. The Russia/Ukraine war was unpredictable and sending ripples through the global economy with soaring food and energy prices. The Fed was a million miles behind the curve in fighting this persistent high inflation. But now, investors have gotten used to the war and the Fed only raised rates 0.25%. That was all investors needed, and all three indices closed yesterday at a six-week high.
There’s also the fact that money still has no place else to go but stocks to fetch a decent return and the economy is still solid, with a promising earnings season coming up next month. We should be OK until the problems start to screw up earnings and economic growth.
I’m not expecting a good year in terms of the overall market and indexes. But certain value-oriented sectors should continue to thrive. Three of the 11 S&P 500 sectors are now in positive territory YTD. Energy has always been positive and is up over 38% YTD. But now, financial stocks and utility stocks have climbed into the black. And more outperformance is likely.
Fortunately, four of the nine current portfolio position are in the positive sectors and doing well. Two other positions are near the high as well. In order to take full advantage of the recent up market, we target a new call in Xcel Energy (XEL) this week.
Trades Past Month
March 2
Sold EPD April 14 $24 calls at $1.25
March 10
SOLD FSK April 14 $22.50 calls at $0.90
March 23
Purchased Innovative Industrial Properties, Inc. (IIPR) - $196.31
Sell GSL May 20 $30 calls at $2.30 or better- Pending
Sell XEL May 20 $70 calls at $3.00 or better
Trade Alert
Sell XEL May 20 $70 calls at $3.00 or better
Expiration date: May 20
Strike price: $70
Call price: $3.00
Xcel Energy Inc. (XEL)
XEL is a bouncy stock that has had a nice recent run as investors have gravitated toward safe utilities in an uncertain market and soaring oil and have gas prices made clean energy alternatives more viable. But I don’t trust this market. XEL has moved close to the high and that is a good time to target calls. Of course, these calls are targeted above the current price. It may take another good day or two for the stock to get there. But I believe there is a high chance it achieves the recent high after having come so far.
Here are the three scenarios.
1.The stock closes above the $70 strike price but near it at expiration.
Call premium: $3.00
Dividends collected: $1.44 (10/20, 1/20, 4/20)
Appreciation: $7.00 ($70.00 strike price minus our $63.00 purchase price)
Total: $11.44 (total return will be 18.2% in 7 months)
2.The stock price closes below but near our $70 strike price.
Call premium: $3.00
Dividends: $1.44
Total: $4.44 (total income of 7% in 7 months)
3.The stock price declines.
The decline will be offset by the $4.44 in income. Plus, our purchase price is $7 per share below the strike price. The stock has a buffer and could still be above the purchase price even if below the strike price.
Stock Portfolio Recap
Enterprise Product Partners (EPD)
Yield 7.4%
This midstream energy partnership was off to the races this year until the energy sector and oil prices pulled back weeks ago. But EPD has since regained traction. The stock stabilized and has been moving back higher to within a whisker of the 52-week high. The temporary overaction that sent oil prices reeling is reversing. It’s tough to predict the near-term gyrations of energy prices and stocks amidst the uncertainty of the war. But the risk appears skewed to the upside. Regardless of the near term, Enterprise’s prospects still look bright for the rest of the year. (This security generates a K1 form at tax time). HOLD
FS KKR Corp. (FSK)
Yield 11.1%
This BDC hasn’t gone up lately. It got pummeled in the market panic of mid-March and has been recovering nicely since. The longer view is more flattering. FSK has returned more than 11% YTD in a down year so far and about 30% in the last year, more than double the market returns over that period. We’ll see what market narrative gets traction in the weeks ahead. But we already supplemented that massive income with a covered call. HOLD
Global Ship Lease, Inc. (GSL)
Yield 5.3%
This is a bouncy stock that has been bouncily trending higher. It’s having a great year but has gone nowhere in the last two weeks-plus while the overall market has been killing it. Still, GSL has returned over 28% YTD in a year where the market has been down and geopolitical tensions have hurt similar types of stocks because the container shipping business is thriving and will likely continue to do so. Short-term noise aside, GSL looks good for the rest of this year. BUY
One Liberty Properties, Inc. (OLP)
Yield 5.8%
This superior industrial REIT had taken it on the chin earlier this year as the REIT sector struggled. But REITs recovered a bit from the early months of this year. OLP had a good few weeks and rose sharply off the recent low. But it has been wallowing a bit again of late. It’s still a tricky environment but One Liberty still has a strong and growing business. I expect the stock to come back into favor at some point in the months ahead. HOLD
Qualcomm Corp. (QCOM)
Yield 1.7%
What’s happened to my beautiful QCOM? It’s down 13% year to date, which is worse than the overall market and much worse than the semiconductor group. This is the company that blew away earnings estimates, sharply raised guidance and enjoyed a slew of analyst upgrades just a few months ago. The ugly tech sector market happened. QCOM had soared over 40% in a month and was ripe for comeuppance. But none of that changes the fact that business is booming. Earnings win in the end. HOLD
U.S. Bancorp (USB)
Yield 3.5%
Yeah, this regional bank stock has gone sideways for about a year. It should be benefiting from higher rates and spreads as well as a still strong economy. I don’t know why it isn’t. But we already sold three calls on this position and will surely get a chance to sell another in the weeks and months ahead. It may be a dog. But it’s a dog we’ve converted into an obscenely high income. HOLD
Visa Inc. (V)
Yield 0.7%
This global payments company stock is acting better lately. V crashed after the initial shock of the Russian invasion as investors soured on anything international. While U.S. business was booming the global recovery was adding another leg to Visa’s recovery. This year looked very promising. It got clobbered but has been moving higher recently as investors recognize V as a good place to bottom fish in the panic phase of the crisis. I expect business to keep growing strong this year and the stock should take off again if this crisis fades. HOLD
Xcel Energy Inc. (XEL)
Yield 2.8%
This alternative energy utility stock had floundered badly through most of February. But it sprung back with a vengeance and got to within bad breath distance of the 52-week high. The reason is that alternative energy stocks have been red hot as conventional energy prices go through the roof. The situation makes clean energy a more viable and economic alternative. I like the stock longer term and the recent wild swings are externally induced in a crazy market. HOLD
Existing Call Trades
Sell EPD April 14 $24 calls at $1.25 or better
EPD looks good. The stock appears to be on track to get back to the 52- week high. And the calls are currently above the target price. But this is a crazy market that could turn south at any time. I like the idea of locking in a big income when the stock is near the high after a rally. The calls are still worth selling at the current price if you haven’t done so already.
Sell FSK April 14 $22.50 calls at $0.90 or better
The story is similar to EPD in that we sold the calls of a stock that is having a good year when it was near the recent high. These calls supplement an already huge income and it’s a good idea to lock in the premiums in this uncertain market.
Sell GSL May 20 $30 calls at $2.30 or better - Pending
We didn’t get this one yet (hence the pending). I like the stock over the rest of the year and am particular that we get a fat premium in order to sacrifice potential appreciation in the near term. Stocks tend to hit a higher targeted price in this portfolio about half the time. We recently got the premium after waiting on QCOM. On V, we removed the trade. That’s OK, we’ll see if GSL hits its price. It only needs one good day to get there.
| CIA STOCK PORTFOLIO | |||||||
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Enterprise Product Ptnrs C | EPD C | 3/17/21 | $23.21 | $25.53 | $25.00 | 7.37% | 19.24% |
| U.S. Bancorp | USB | 3/24/21 | $53.47 | $56.71 | $57.00 | 3.22% | 9.36% |
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $158.45 | $140.00 | 1.72% | 19.76% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $30.11 | $33.00 | 5.98% | 3.44% |
| Xcel Energy Inc. | XEL PC | 10/12/21 | $63.00 | $71.24 | $67.00 | 2.76% | 14.66% |
| FS KKR Capital Corp. C | FSK C | 10/27/21 | $22.01 | $22.69 | $24.00 | 11.11% | 9.36% |
| Visa Inc. | V | 12/22/21 | $217.96 | $220.77 | $225.00 | 0.69% | 1.46% |
| Global Ship Lease, Inc. | GSL PC | 2/23/22 | $24.96 | $29.23 | $28.00 | 3.42% | 17.11% |
| Innovative Industrial Props. | IIPR | 3/23/22 | $196.31 | $203.05 | $210.00 | 3.50% | 3.43% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| EPD Apr 14th $24 call | EPD220414C00023000 | Sell | 3/2/22 | $1.25 | $1.60 | $1.25 | 5.39% |
| FSK Apr 14th $22.50 call | FSK 220414C00022500 | Sell | 3/10/22 | $0.90 | $0.55 | $0.90 | 4.89% |
| GSL May 20th $30 call | GSL220520C00030000 | Sell pending | $1.86 | $2.30 | 9.21% | ||
| XEL May 20th $70 call | XEL220520C00070000 | Sell pending | $2.55 | $3.00 | 4.76% | ||
| as of close on 3/28/2022 | |||||||
| 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% |
| 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% | |