Hope Makes a Comeback
It looked grim for a while there. And we’re certainly not out of the woods yet. But hope has stopped the market decline, at least for now.
The broader S&P 500 index closed earlier this week at a YTD low, down over 16% for the year and over 17% from the high. It is dangerously close to the 20% bear market level which would officially end the bull market that started in March of 2020. That would be an important psychological level that would likely prompt more selling.
The market is grappling with how to price in an ugly reality. It is increasingly unlikely that the Fed will be able to reign in the high and persistent inflation without slowing the economy to a recession or close to it. The market anticipates. And it’s not good when it looks ahead and sees high inflation, rising interest rates and a souring economy.
But hope made an appearance and stopped or delayed market selling. The hope is that inflation may have peaked or close to it. Inflation will contract of its own volition and the Fed won’t have to be as aggressive as feared. If the market can get over this inflation hump without dabbling with a recession, it would be a huge relief for stocks.
But that scenario is still a long way from reality at this point. The market is at a very important juncture. It could fall into a bear market and beyond. Or it could recover and never get there. It’s worth noting that in the last bull market the S&P twice came right up to the precipice of a 20% decline but stayed above it and rallied.
It could be that we are very near the low point for stocks this year. But we are on the cusp of the danger level. One more ugly day could thrust us into a bear market and beyond.
While many stocks are at very attractive prices, it’s still very risky to start buying here. But if there is increasing evidence of a recovery off this bottom, it could be a good time to buy. Keep an eye out for “trade alerts” in your email in case that opportunity arises between weekly updates.
Trades Past Month
April 13th
SOLD U.S. Bancorp stock (USB) - $50.61
April 14th
EPD April 14th $24 calls at $1.25 - Expired
FSK April 14th $22.50 calls at $0.90 - Expired
Enterprise Product Partners (EPD) stock - Called
FS KKR Capital Corp. (FSK) stock - Called
Stock Portfolio Recap
Global Ship Lease, Inc. (GSL)
Yield: 6.8%
Global is a container shipping company that is an international and cyclical stock. So naturally, it has been knocked back with the recent growth concerns. It’s down over 25% from the high in late March. But the industry fundamental remain very strong and will likely continue to do so even amidst slowing global growth. Every time fear wanes, and it always does, GSL recovers strongly. That’s why the stock has averaged a 60% annual return for the past three years. I expect it to come roaring back. This is a good entry point. BUY
Innovative Industrial Properties, Inc. (IIPR)
Yield: 5.4%
It has been ugly indeed for the marijuana REIT. The market has been particularly unforgiving for the high-growth superstars of last year. But this stock is capable of moving higher very quickly when the market settles down. 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. The market always comes back to such things eventually. BUY
One Liberty Properties, Inc. (OLP)
Yield: 7.0%
This superior industrial REIT and formerly red-hot mover has been doused with ice water this year. It’s down 25% YTD after returning 87% in 2021. It has been an unforgiving market. But it is a solidly growing REIT in a superior niche with high demand and limited supply. OLP is also reasonably valued, selling below its five-year average price-earnings ratio. Earnings were solid and the stock has been moving higher since. BUY
Qualcomm Corp. (QCOM)
Yield: 2.2%
Qualcomm reported earnings last week that once again impressed, and raised guidance for the rest of the year. The stock jumped 10% after the report. Revenues and earnings continue to grow at a fever clip and will likely continue to do so for the rest of the year at least. It’s just in the wrong sector at the wrong time. But the company continues to deliver despite supply disruptions and other concerns and sells at a cheap valuation considering the growth rate. The good should outweigh the bad, especially considering the stock already got the stuffing kicked out of it. HOLD
Visa Inc. (V)
Yield: 0.8%
This global payments company stock is getting creamed in this market. It has fallen below 200 per share again. Growth concerns damage this stock whenever the market selling gets intense. But this stock should recover and remain strong this year. The tremendous earnings boost it gets globally from the removal of covid restrictions easily outweighs slower global growth or geopolitical uncertainty. Visa’s earnings blew away expectations with YOY revenue growth of 25% and 30% earnings growth. There is a risk of covid escalating beyond China but without a deterioration in circumstances Visa should be just fine. HOLD
Xcel Energy Inc. (XEL)
Yield: 2.6%
This alternative utility soared to new highs as a utility and clean energy alternative amidst skyrocketing oil and gas prices. It also tends to pull back after a strong surge. It started to, but then the ugly market made investors come right back. XEL actually moved a little higher over the past two tumultuous weeks. The resiliency during the tough market has been remarkable. HOLD
Existing Call Trades
Sell XEL June 17th $70 calls at $3.00 or better
We sold these calls at a strike price below the current market on the anticipation of a pullback after a big surge in the stock. But, as I mentioned above, XEL isn’t pulling back. It is unlikely at this point that the stock falls 5 per share below the strike price by options expiration in 10 days.
| CIA STOCK PORTFOLIO | |||||||
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Qualcomm Inc. | QCOM | 5/5/2021 | $134.65 | $136.81 | $140.00 | 2.22% | 3.41% |
| One Liberty Properties | OLP | 7/28/2021 | $30.37 | $25.63 | $33.00 | 7.20% | -11.95% |
| Xcel Energy Inc. C | XEL | 10/12/2021 | $63.00 | $73.49 | $67.00 | 2.65% | 18.28% |
| Visa Inc. | V | 12/22/2021 | $217.96 | $193.58 | $225.00 | 0.77% | -11.04% |
| Global Ship Lease, Inc. | GSL | 2/23/2022 | $24.96 | $22.01 | $28.00 | 6.82% | -11.82% |
| Innovative Industrial Props. | IIPR | 3/23/2022 | $196.31 | $128.61 | $210.00 | 5.37% | -33.93% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| XEL May 20th $70 call | XEL220520C00070000 | Sell | 3/24/2022 | $3.00 | $3.90 | $5.00 | 4.76% |
| as of close on 5/10/2022 | |||||||
| SOLD STOCKS | |||||||
| Security | Ticker Symbol | Action | Entry Date | Entry Price | Sale Date | Sale Price | Total Return |
| Innovative Industrial Props. | IIPR | Called | 6/2/2020 | $87.82 | 9/18/2020 | $100.00 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/2020 | $89.14 | 9/18/2020 | $95.00 | 7.30% |
| U.S. Bancorp | USB | Called | 7/22/2020 | $36.26 | 9/18/2020 | $38 | 3.42% |
| Brookfield Infras. Ptnrs. | BIP | Called | 6/24/2020 | $41.92 | 10/16/2020 | $45 | 8.49% |
| Starbucks Corp. | SBUX | Called | 8/26/2020 | $82.41 | 10/16/2020 | $88 | 6.18% |
| Visa Corporation | V | Called | 9/22/2020 | $200.56 | 11/20/2020 | $200 | 0.00% |
| AbbVie Inc. | ABBV | Called | 6/2/2020 | $91.04 | 12/31/2020 | $100 | 12.43% |
| Enterprise Prod. Prtnrs. | EPD | Called | 6/24/2020 | $18.14 | 1/15/2021 | $20 | 15.16% |
| Altria Group | MO | Called | 6/2/2020 | $39.66 | 1/15/2021 | $40 | 7.31% |
| U.S. Bancorp | USB | Called | 11/25/2020 | $44.68 | 1/15/2021 | $45 | 1.66% |
| B&G Foods Inc, | BGS | Called | 10/28/2020 | $26.79 | 2/19/2021 | $28 | 4.42% |
| Valero Energy Inc. | VLO | Called | 8/26/2020 | $53.70 | 3/26/2021 | $60 | 11.73% |
| Chevron Corp. | CVX | Called | 12/23/2020 | $85.69 | 4/1/2021 | $96 | 12.95% |
| KKR & Co. | KKR | Called | 3/24/2021 | $47.98 | 6/18/2021 | $55 | 14.92% |
| Digital Realty Trust | DLR | Called | 1/27/2021 | $149.17 | 7/16/2021 | $155 | 5.50% |
| NextEra Energy, Inc. | NEE | Called | 2/24/2021 | $73.76 | 9/17/2021 | $80 | 10.00% |
| Brookfield Infras. Ptnrs. | BIP | Called | 1/13/2021 | $50.63 | 10/15/2021 | $55 | 11.65% |
| AGNC Investment Corp | AGNC | Sold | 1/13/2021 | $15.52 | 1/19/2022 | $15 | 5.92% |
| ONEOK, Inc. | OKE | Called | 5/26/2021 | $52.51 | 2/18/2022 | $60 | 19.62% |
| KKR & Co. | KKR | Sold | 8/25/2021 | $64.52 | 2/23/2022 | $58 | -9.73% |
| Valero Energy Inc. | VLO | Called | 11/17/2021 | $73.45 | 2/25/2022 | $83 | 15.53% |
| U.S Bancorp | USB | Sold | 3/24/2021 | $53.47 | 4/13/2022 | $51 | -1.59% |
| Enterprise Product Ptnrs | EPD | Called | 3/17/2021 | $23.21 | 4/14.2022 | $24 | 11.25% |
| FS KKR Capital Corp. | FSK | Called | 10/27/2021 | $22.01 | 4/14/2022 | $23 | 13.58% |
| EXPIRED OPTIONS | |||||||
| Security | In/out money | Sell Date | Sell Price | Exp. Date | $ return | Total % Return | |
| IIPR Jul 17 $95 call | out-of money | 6/3/2020 | $3.00 | 7/17/2020 | $3.00 | 3.40% | |
| MO Jul 31 $42 call | out-of-money | 6/17/2020 | $1.60 | 7/31/2020 | $1.60 | 4.03% | |
| ABBV Sep 18 $100 call | out-of-money | 7/15/2020 | $4.60 | 9/18/2020 | $4.60 | 5.05% | |
| IIPR Sep 18 $100 call | in-the-money | 7/22/2020 | $5.00 | 9/18/2020 | $5.00 | 5.69% | |
| QCOM Sep 18 $95 call | in-the-money | 6/24/2020 | $4.30 | 9/18/2020 | $4.30 | 4.82% | |
| USB Sep 18 $37.50 call | in-the-money | 7/22/2020 | $2.00 | 9/18/2020 | $2.00 | 5.52% | |
| BIP Oct 16 $45 call | in-the-money | 9/2/2020 | $1.95 | 10/16/2020 | $1.95 | 4.65% | |
| SBUX Oct 16 $87.50 call | in-the-money | 10/16/2020 | $3.30 | 10/16/2020 | $3.30 | 4.00% | |
| V Nov 20 $200 call | in-the-money | 9/22/2020 | $10.00 | 11/20/2020 | $10.00 | 4.99% | |
| ABBV Dec 31 $100 call | in-the-money | 11/18/2020 | $3.30 | 12/31/2020 | $3.30 | 3.62% | |
| EPD Jan 15 $20 call | in-the-money | 11/23/2020 | $0.80 | 1/15/2021 | $0.80 | 4.41% | |
| MO Jan 15 $40 call | in-the-money | 11/25/2020 | $1.90 | 1/15/2021 | $1.90 | 4.79% | |
| USB Jan 15 $45 call | in-the-money | 11/25/2020 | $2.00 | 1/15/2021 | $2.00 | 4.48% | |
| BGS Feb 19 $27.50 call | in-the-money | 12/11/2020 | $2.40 | 2/19/2021 | $2.40 | 8.96% | |
| VLO Mar 26 $60 call | in-the-money | 2/10/2021 | $6.50 | 3/26/2021 | $6.50 | 12.10% | |
| CVX Apr 1 $95.50 call | in-the-money | 2/19/2021 | $4.30 | 4/1/2021 | $4.30 | 5.02% | |
| AGNC Jun 18 $17 call | out-of-money | 4/13/2021 | $0.50 | 6/18/2021 | $0.50 | 3.21% | |
| KKR Jun 18 $55 call | in-the-money | 4/28/2021 | $3.00 | 6/18/2021 | $3.00 | 6.25% | |
| USB Jun 16 $57.50 call | out-of-money | 4/28/2021 | $2.80 | 6/18/2021 | $2.80 | 5.24% | |
| DLR Jul 16 $155 call | in-the-money | 6/16/2021 | $8.00 | 7/16/2021 | $8.00 | 5.36% | |
| AGNC Aug 20 $17 call | out-of-money | 6/23/2021 | $0.50 | 8/20/2021 | $0.50 | 3.00% | |
| OKE Aug 20 $57.50 call | out-of-money | 6/23/2021 | $3.50 | 8/20/2021 | $3.50 | 6.67% | |
| NEE Sep 17 $80 call | in-the-money | 8/11/2021 | $3.50 | 9/17/2021 | $3.50 | 4.75% | |
| BIP Oct 15 $55 call | in-the-money | 9./01/2021 | $2.00 | 10/15/2021 | $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 | 10/20/2021 | $2.25 | 11/26/2021 | $2.25 | 4.28% | |
| KKR Dec 17 $75 call | out-of-money | 10/26/2021 | $3.50 | 12/17/2021 | $3.50 | 5.42% | |
| QCOM Jan 21 $185 Call | out-of-money | 11/30/2021 | $9.65 | 1/21/2022 | $9.65 | 7.17% | |
| OLP Feb 18 $35 Call | out-of-money | 11/19/2021 | $1.50 | 2/18/2022 | $1.50 | 4.94% | |
| OKE Feb 18 $60 Call | in-the-money | 1/5/2022 | $2.75 | 2/18/2022 | $2.75 | 5.24% | |
| USB Feb 25 $61 call | out-of-money | 1/13/2022 | $2.50 | 2/25/2022 | $2.50 | 4.68% | |
| VLO Feb 25 $83 call | in-the-money | 1/18/2022 | $4.20 | 2/25/2022 | $4.20 | 6.13% | |
| EPD Apr 14th $24 call | in-the-money | 3/2/2021 | $1.25 | 4/14/2022 | $1.25 | 5.69% | |
| FSK Apr 14th $22.50 call | in-the-money | 3/10/2021 | $0.90 | 4/14/2022 | $0.90 | 4.09% | |