Not Yet
The market has improved from the heavy selling of last week. But I’m not buying this rally just yet.
At the low point of the selling last week, the S&P 500 was down about 19% from the high. That was dangerously close to a bear market, down 20% from the high on a closing basis. A bear market is an important psychological level that would likely prompt further selling if crossed. And we came right up to the cusp.
The market has since rallied. There is also recent historical precedent to indicate we may have seen the low. During the last bull market, the S&P fell right to the cusp of the 20% level (in 2011 and 2018). Both times the index stayed above it and rallied from there. So far, the market is indicating that it may do the same this time. But I’m not convinced.
The problem is that inflation and an aggressively tightening Fed will slow down the economy, possibly to a recession or close to it. The market is having trouble shaking off recent selling while it looks ahead to high inflation, rising interest rates, and a deteriorating economy. Stocks will be hard pressed to generate any lasting upside traction until that sour vision improves. And it is difficult to see a positive resolution any time soon.
There is also much worse carnage in market than the indexes indicate. A huge number of stocks are already well into bear market territory. The selling has been particularly bad in the technology sector. Sure, some stocks were overvalued and had it coming. And that sector has been riding high for a long time. But the selling has gotten overdone in many stocks.
Sure, inflation and the Fed may be all the rage right now. But we are in fact in the midst of a technological revolution. Technology won’t stop no matter what the Fed does. The bargain stocks may fall further, but many stocks have gotten cheap from a longer-term perspective.
The market is still too uncertain right now. But things can change. And there are certainly some bargains developing. Stay tuned.
Trades Past Month
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: 6.9%
This containership company stock and superstar performer of the last several years took a big hit in the latest market down leg. It’s the global growth concerns that have turned performance sour. And the stock could be under more pressure as long as investors panic over slower growth in China and the consequences of the Fed’s aggressive rate hikes. But profitability will remain high even if shipping rates fall from here because contracts have been renewed at much higher rates than in the past. Plus, container shipping will likely also remain strong in all but a severe global recession. This stock should come back when markets stabilize. BUY
Innovative Industrial Properties, Inc. (IIPR)
Yield: 5.5%
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: 6.7%
REITs have been in the crosshairs of the recent market tumult. The real estate sector is actually the second-worst performing of the 11 S&P 500 sectors over the last month. Rising interest rates threaten the attractiveness of the yields and raise the cost of debt while many REITs have a sizable debt load. But REITs are also a good place to be during inflation. And several REITs, including OLP, are very capable of thriving despite higher rates. The pendulum should swing back and take this exceptional REIT with it. BUY
Qualcomm Corp. (QCOM)
Yield: 2.2%
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. Certain tech stock have been way oversold already, and QCOM is one of them. These things get straightened out over time. HOLD
Visa Inc. (V)
Yield: 0.8%
V 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 is one of the very few non-energy sector stocks that has continued to thrive in the recent market. True, the stock price has leveled off since making a high in early April. But it has been hanging tough and is still within just pennies of the high. Utilities have been strong, as has alternative energy. XEL is a great stock for the future as clean energy should remain popular, and it is also good in case of continuing market selling. 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 on Friday. But we’ll get a great income and total return in a relatively short time in an ugly market.
| 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 | $133.91 | $140.00 | 2.22% | 1.21% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $26.24 | $33.00 | 6.86% | -9.85% |
| Xcel Energy Inc. C | XEL | 10/12/21 | $63.00 | $74.83 | $67.00 | 2.61% | 20.44% |
| Visa Inc. | V | 12/22/21 | $217.96 | $197.81 | $225.00 | 0.76% | -8.92% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $22.51 | $28.00 | 6.92% | -9.82% |
| Innovative Industrial Props. | IIPR | 3/23/22 | $196.31 | $133.16 | $210.00 | 5.52% | -31.59% |
| 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 | 3/24/22 | $3.00 | $4.95 | $5.00 | 4.76% |
| as of close on 5/16/2022 | |||||||
| 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% |
| 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 | 3/2/21 | $1.25 | 4/14/22 | $1.25 | 5.69% | |
| FSK Apr 14th $22.50 call | in-the-money | 3/10/21 | $0.90 | 4/14/22 | $0.90 | 4.09% | |