Not Good
This market distinctly turned ugly again. The S&P 500 and the Nasdaq closed at year-to-date lows on Friday.
It was hoped that earnings could save the floundering market. But it isn’t happening. Inflation and slowing growth are creating a pall over everything. The Fed seems determined to make up for lost time and aggressively hike interest rates. Stocks can’t get much traction as investors look ahead to more inflation, rising interest rates and a weaker economy.
Perhaps the market can get a bounce from the lows, however short-lived it may be. I know. It’s a bummer. But this market is figuring out a way to contend with an aggressively hawkish Fed for the first time since forever. The good news is that the bottom is unlikely to fall out as the American economy is stronger and more resilient than it ever gets credit for. Plus, certain stocks are benefitting in the new dynamic and others are getting oversold amidst the pessimism.
This portfolio has taken a conservative turn amidst the market volatility. Several portfolio positions have either been called away or sold outright so far this year and fewer have been purchased. Also, many of the calls sold were in-the-money, or with a strike price below the market price at time of sale.
That way, we were able to get a high call premium despite a down market and sell several stocks near the high. Parting with some of those stocks hurt at the time. But the sales are looking like a good idea in the recent market.
The current sentiment is still bearish, as investors perceive more downside risk than upside potential in the near term. This environment is bad for calls prices as few investors are willing to speculate on higher prices. It’s a better market to look for oversold opportunities. Keep an eye out for “Trade Alerts” in your email as opportunities could arise between weekly updates.
Trades Past Month
April 6
Sell GSL May 20th $30 calls at $2.30 or better- Removed
April 13
SOLD U.S. Bancorp stock (USB) - $50.61
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: 6.7%
This containership company can be volatile, and this month we’ve seen the downside of that feature. It’s down over 20% since the beginning of April. GSL initially took a hit on global growth fears from the Fed’s likely aggressive rate hikes. It then started to recover strongly and then took another hit on news of covid spreading in China. The fear is that slowing global growth will negatively affect shipping rates and company profits.
But profitability is on the rise even if rates take a hit. Shipping rates remain far higher this year as demand for containers and ships that transport them remain strong amidst limited supply. And that situation should last a while. Despite the recent weakness, GSL is still only down less than 3% YTD and has returned 67% over the past year and averaged an annual return of 60% over the last three years. GSL takes a hit every time new growth concerns develop. But then it recovers after fear wanes and investors realize that container shipping and company profits will remain strong. It’s a good entry point for the stock. BUY
Innovative Industrial Properties, Inc. (IIPR)
Yield: 4.8%
This is a great company with strongly growing earnings that has gotten caught up in the whirlwind of this year’s market volatility. It’s down about 40% YTD. This market has been very unforgiving to stocks that were stellar performers last year. Even after being down considerably from the high, IIPR has returned an average of 56% per year over the last five years.
Earnings grew 75% in 2021. That growth rate will slow somewhat. Analysts are forecasting 37% revenue growth for 2022. But the stock trades at a price/earnings ratio lower than that of the overall market with much higher growth and a high dividend. Sure, stocks and sectors go in and out of favor in the near term. This one should come back into favor. And patience should be rewarded. The stock could also get a boost from the quarterly earnings report tomorrow. BUY
One Liberty Properties, Inc. (OLP)
Yield: 6.3%
This superior industrial REIT and formally red-hot mover has been doused with ice water this year. It’s down 20% YTD after returning 87% in 2021. It has been an unforgiving market toward last year’s superstars. 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 5-year average price/earnings ratio. I believe the stock has been oversold and might get a bounce after the earning report later this week. BUY
Qualcomm Corp. (QCOM)
Yield: 2.2%
QCOM had been wallowing along having a terrible year amidst the tough technology sector market. It has faith because the company has consistently exceeded expectations as it benefits mightily from the 5G phone rollout while making huge strides in other business with very promising prospects going forward. 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. The stock is being held back by China concerns, where Qualcomm does significant business, as covid spreads. 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: 0.7%
This global payments company stock had been floundering amidst global growth concerns precipitated by a tightening Fed and the spread of covid in China. But Visa reported earnings last week that impressed the market and the stock rallied 8% on the day of the announcement. The stock blew away expectations with YOY revenue growth of 25% and 30% earnings growth.
The reason for the great quarter is the reason V was purchased in the portfolio. Global business is booming as covid restrictions have come down and travel has returned. U.S. business has already recovered, and the global side was the missing piece of the puzzle. The global business is so strong it overwhelmed higher costs and geopolitical uncertainty from the war. Of course, the stock has pulled back since as this is still a fearful market. The company raised this year’s guidance and should have good days ahead. HOLD
Xcel Energy Inc. (XEL)
Yield: 2.6%
The market has been so crummy it even stopped XEL from making new highs. The stock has leveled off since early this month and even pulled back a little in the volatility of recent days. I do like the stock longer term as safety is unlikely to go out of style in this tumultuous year. It’s also a great way for conservative investors to play the growth of alternative energy. But the stock can be bouncy in the near term and may pull back further. That’s why we sold calls at a strike price below the market when the stock was riding high. 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. XEL is finally showing some kinks in the armor. It has leveled off since early this month and even pulled back a bit in the recent volatility. Although I still like the prospects for XEL for the rest of this year and beyond, XEL typically pulls back after a big surge. The calls are currently selling at 3.30 and are still worth selling if you haven’t done so already.
| 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 | $145.27 | $140.00 | 2.15% | 9.80% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $28.03 | $33.00 | 6.28% | -3.70% |
| Xcel Energy Inc. C | XEL | 10/12/21 | $63.00 | $72.67 | $67.00 | 2.66% | 16.96% |
| Visa Inc. | V | 12/22/21 | $217.96 | $211.53 | $225.00 | 0.71% | -2.79% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $22.51 | $28.00 | 6.66% | -9.82% |
| Innovative Industrial Props. | IIPR | 3/23/22 | $196.31 | $144.50 | $210.00 | 4.84% | -25.76% |
| 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 | $3.50 | $5.00 | 4.76% |
| as of close on 5/3/2022 | |||||||
| 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% | |