Here Comes September
Three straight weeks of market declines have moved the S&P 500 down 8.9% from the mid-August high. The selling is continuing this first day after Labor Day, so far.
It’s our old friends inflation and recession causing trouble. The market increasingly fears recession as the hawkish Fed raises rates to tame inflation and investors anticipate a hard landing. The weakness may continue in the weeks ahead, as September is historically the worst month of the year for the market.
The hope now is that inflation will continue to ease, and the Fed will tone down its aggressiveness as a result. If investors can again see the Fed done hiking rates in six or nine months, it could prompt another rally. The problem is that the same forces easing inflation, namely economic weakness, will likely pressure earnings in the quarters ahead.
It’s still a bit of a mess. For that reason, the portfolio is being increasingly cautious for now. That said, after the recent market tumult there are buying opportunities in portfolio positions ONEOK (OKE) and The Williams Companies (WMB). These stocks have the ability to endure inflation and recession while providing a sizable income at the same time.
Trades This Past Month
August 24th
SOLD One Liberty Properties (OLP) - $24.89
Purchased Williams Companies Inc. (WMB) - $35.58
SOLD OKE October 21st $65 calls at $3.40 or better
August 30th
Star Bulk Carriers Corp. (SBLK) – Rating change “HOLD” to “SELL HALF”
Qualcomm Corp. (QCOM) – Rating change “BUY” to “HOLD”
Portfolio Recap
Global Ship Lease, Inc. (GSL)
Yield 8.0%
In what had been a downdraft for the market and cyclical stocks since the middle of August, GSL bucked the trend with the announcement of new forward charter agreements for six large ships. These are long-term agreements at still high rates that will juice earnings for the next several years. GSL spiked more than 10% higher on the news but has since leveled off.
Shipping stocks may also be in a secular bull market as supply, especially for container ships, won’t keep up with growing demand in the years ahead. This ornery market may knock around shipping stocks in the near term. But the longer-term trajectory should be higher. The good news gives GSL a reprieve for now despite the fact that market storm clouds are gathering. HOLD
Intel Corp. (INTC)
Yield 4.7%
The chip maker just made a massive investment in chip production. It partnered with BIP for a $30 billion investment in a semiconductor fabrication plant where Intel will maintain majority control by providing 51% of the capital. It’s a big and bold move. But the stock is still under pressure as growing recession worry weighs on projected PC sales over the next year. The one consolation is that its semiconductor peers are down a lot more over the past week. We’ll see how this news shakes out in the weeks ahead. HOLD
ONEOK, Inc. (OKE)
Yield 6.3%
Even this very well-positioned midstream energy player has taken a drubbing in the recent market tumult. But this is one of the few companies that can endure inflation and recession as energy markets remain supply challenged and likely will continue to be for some time. OKE moved more than 20% above the June low and has significantly outperformed the overall market over the past month. As investors get more defensive they realize that midstream energy stocks offer cheap valuations, safe dividends, and a favorable industry dynamic. BUY
Star Bulk Carriers Corp. (SBLK)
Yield 32.7%
The shipping company continues to be under heavy selling pressure in the recent market weakness. Despite the fact that the intermediate-term prognosis remains excellent for dry bulk shipping, the market is struggling with newfound worries about the U.S. and global economies. Unlike GSL, there hasn’t been unexpected good news to counter the market narrative. We were able to lock in the next $1.65 dividend, payable September 16 with an ex-date of August 24, which is 5.3% of the original purchase price. But there is a risk of further downside in the near term. That’s why half the position was sold last week. HOLD
Qualcomm Corp. (QCOM)
Yield 2.3%
Chip maker stocks have been under increased selling pressure as global economic fears take center stage. But QCOM looks like it wants to recover. In a friendly market it rallies nicely. In a bad market for technology, it tends to fall less. Although it reduced guidance for the rest of the year because of lower projected smartphone sales, the company still anticipated 23% revenue growth for the second half of the year. Meanwhile, QCOM sells at less than 11 times forward earnings, which is cheap for this level of growth. HOLD
Visa Inc. (V)
Yield 0.8%
V has been under pressure in this latest market selloff. It always takes a hit when the more cyclical stocks are under pressure. But it has consistently tended to have strong support around the 200 per share level, where it is now, and be among the first such stocks to rally back when the selling abates. The company continues to thrive from increased global business from the ending of Covid restrictions despite slower global growth. HOLD
The Williams Companies, Inc. (WMB)
Yield 5.0%
The midstream energy powerhouse has been down the past couple of weeks, along with just about everything else. However, the uptrend since the June low remains intact and the company is thriving. Natural gas demand is resilient. Earnings per share shot up 29% in the first half of 2022 versus the same period last year. The recently reported quarter featured a whopping 48% earnings per share spike over last year’s quarter. Williams also increased 2022 earnings guidance. Like OKE, it offers value and a high and safe yield in an industry with strong dynamics. BUY
Existing Covered Call Trades
Sold QCOM Sep 16th $145 calls at $11.75 or better
The calls that fetched $11.75 at the time they were sold are now worth mere pennies as the stock has again plunged in the recent market tumult. There is only a little over a week left until options expiration and the stock is highly unlikely to move $20 per share higher in that time. I was tempted to buy back the calls and free the stock to move higher or sell more calls. But with so little time left it isn’t worth the effort.
Sold OKE October 21st $65 calls at $3.40 or better
Although OKE, along with the midstream energy sector, should be an excellent place to be in the market over the rest of the year, just about all sectors have been weaker during this market turn. And things might get worse in the weeks ahead. But we locked in a solid income from the call premium and OKE should hold up relatively well.
| 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 | $152.13 | $128.48 | NA | 2.31% | -1.82% |
| Visa Inc. | V | 12/22/21 | $217.96 | $197.76 | NA | 0.76% | -8.78% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $18.64 | NA | 8.05% | -22.49% |
| ONEOK, Inc. | OKE | 5/25/22 | $65.14 | $60.55 | $67.00 | 6.28% | -5.59% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $19.89 | NA | 32.93% | -32.72% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $31.22 | $42.00 | 4.68% | -21.50% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $33.72 | $38.00 | 5.00% | -5.23% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| QCOM Sep 16th $145 call | QCOM220916c00145000 | Sell | 7/20/22 | $11.75 | $0.25 | $11.75 | 8.73% |
| OKE Oct 21st $65 call | OKE221021C00065000 | Sell | 8/24/22 | $3.40 | $1.20 | $3.40 | 5.22% |
| as of close on 9/02/2022 | |||||||
| 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% |
| Innovative Industrial Props. | IIPR | Sold | 3/23/22 | $196.31 | 7/20/22 | $93 | -51.23% |
| One Liberty Properties | OLP | Sold | 7/28/21 | $30.37 | 8/24/22 | $25 | -12.94% |
| 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% | |
| SBLK July 15th $134 call | out-of-money | 6/1/22 | $1.60 | 7/15/22 | $1.60 | 4.80% | |