Stocks Look to Rebound After a Down Week
Stocks are starting the week back in business after last week’s dip over the credit downgrade. The credit downgrade doesn’t appear to be having much effect on the market at this point. Unless that changes, the market appears poised to continue to forge higher, at least for the time being.
Meanwhile, it’s still earnings season and the past couple of weeks have been busy for the portfolio. Earnings had been very kind to the portfolio two weeks ago with Digital Realty (DLR), AbbVie (ABBV), and Intel (INTC) all getting sizable boosts with better-than-expected results. But the season soured on the portfolio last week as both Qualcomm (QCOM) and Star Bulk Carriers (SBLK) laid eggs.
The earnings report led to the portfolio selling SBLK this week as better times appear to be further away than previously thought. But it does make sense to hang onto Qualcomm, which will inevitably have better fortune in the future while the stock is cheap now.
The still-bullish market could discombobulate down the road. Inflation could rise again. The economy could roll over. But even if such things happen, they appear unlikely to materialize at least before the end of the summer. For now, times are still generally good for the overall market.
The midstream energy companies, ONEOK (OKE) and The Williams Companies (WMB) have been strong in the broadening rally as well as Hess (HES) and Digital Realty (DLR). There are covered call opportunities developing, but I expect the market to continue to rebound from last week’s dip. Keep an eye out for “Trade Alerts” in your email.
Past Month Activity
July 11th
SOLD V August 18th $235 calls at $9.00
SOLD GSL August 18th $20 calls at $1.25
July 18th
Purchased Digital Realty Trust, Inc. (DLR) - $117.31
Intel Corp. (INTC) - Rating change “HOLD” to “BUY”
Qualcomm (QCOM) - Rating change “HOLD” to “BUY”
July 21st
BIPC July 21st $45 calls – Expired
Brookfield Infrastructure Corp. stock (BIPC) – Called
July 25th
Purchased AbbVie Inc. (ABBV) - $141.63
Sold OKE Sep 15th $65 calls at $3.20
August 8th
Star Bulk Carriers Corp. (SBLK) - Rating change “HOLD” to “SELL”
Portfolio Recap
AbbVie Inc. (ABBV)
Yield: 4.0%
AbbVie reported earnings that beat on both earnings and revenue and the company also raised earnings guidance for the year. The stock spiked 6.3% after the report but has since leveled off. Humira sales were down less than expected and AbbVie’s replacement immunology drugs did better than expected. The report emboldens the notion that the revenue drop from the Humira patent expiration will be very temporary and AbbVie will turn the corner sooner than expected en route to a promising future. BUY
Digital Realty Trust (DLR)
Yield: 4.1
Digital also reported better-than-expected earnings last week because of strong data center demand and solid growth. Even more importantly, the company assuaged fears that had driven the stock price down earlier this year by executing capital recycling plans that raised over $2 billion by selling joint venture assets. The move strengthens the balance sheet and secures the dividend. Now the REIT is poised to benefit from accelerating data center demand growth prompted by the AI craze. BUY
Global Ship Lease, Inc. (GSL)
Yield: 7.0%
The container shipping company reported earnings last week that beat estimates with revenue growth of 4.9% and earnings per share growth of 14.8% from last year’s quarter. The company posted good results despite tougher comparisons after greatly expanding its fleet two years ago. The company still has higher than current market rates under long-term contracts and the ships chartered at new rates have higher rates than existed pre-covid. Global is also continuing to expand the fleet, buying ships at the cheapest prices that have existed since before the pandemic. The stock is hanging tough over the $20 per share level. HOLD
Hess Corporation (HES)
Yield: 1.1%
The exploration and production company stock has moved 17% higher in the last month and is now within 5% of the 52-week high. It did report earnings that beat expectations as higher production offset lower realized oil and gas prices. But energy stocks have been moving higher as oil prices are on the rise because of strong demand and limited supply. Hess’s strong margins give it strong leverage in a rising energy price environment. BUY
Intel Corp, (INTC)
Yield: 1.5%
The chipmaker reported earnings that beat estimates, and the company returned to profitability. The PC market appears to have bottomed out and is poised for a possible second-half recovery as Intel is also increasing its market share. Shares had initially soared, but the stock has since lost almost all of the gains as any euphoria wore off, at least for now. Intel does still have a promising future as it has invested heavily in chips in high-growth areas and insiders have been buying heavily into the stock. BUY
NextEra Energy, Inc. (NEE)
Yield: 2.7%
The weakness continues. This combination regulated and clean energy utility stock just hit a new 52-week low. The utility sector remains under pressure even in the broadening market rally as interest rates have risen and growth plays continued to be favored. But the operational performance is solid. The utility grew earnings 8.6% in the second quarter and 11% in the first half versus the same periods last year. It also has predictably solid earnings going forward because of a considerable project backlog. BUY
ONEOK, Inc. (OKE)
Yield: 5.8%
After getting clobbered in May when the market hated its purchase of Magellan Midstream Partners (MMP), OKE has been coming right back and has regained all those losses. It’s up over 17% since the beginning of June and is within less than 10% of the 52-week high. OKE has been trending sharply higher as the energy sector is recovering and the rally is broadening. The midstream energy company reports earnings this week that could stifle the rally or drive the stock toward the high. HOLD
Realty Income Corp. (O)
Yield: 5.2%
This legendary monthly income stock reported earnings that slightly beat estimates. It also revealed a stellar 99% occupancy rate for its properties and an additional $3.1 billion invested in the quarter in 710 properties. The REIT has been solid, but this market isn’t rewarding solid at this point. O currently sells well below the pre-pandemic high, despite having higher earnings. But income and safety will come back into vogue eventually. BUY
Rating change “HOLD” to “SELL”
Star Bulk Carriers Corp. (SBLK)
Yield: 7.7%
The dry bulk shipping company severely disappointed last week and forecasts were revised downward. The new estimates represent a 40% decline in revenues and 38% in earnings from last year. The shipping industry is expected to see a revenue decline of just 3.5%. GSL will grow earnings for the year.
SBLK has moved off the low and didn’t take a hit after earnings. The stock may have bottomed. But a meaningful rise in the price seems like a long while away. The dividend is variable, so it won’t be as bad as a dividend cut for a stable dividend. But it is sure to fall. Perhaps, it will be a good investment at some point in the future. But for now, it looks like money can be better invested elsewhere. SELL
Qualcomm Corp. (QCOM)
Yield: 2.6%
Qualcomm reported earnings results last week that the market hated, and the stock has fallen over 10% since the report. Earnings were mixed with revenues missing forecasts and earnings beating. But earnings were down 37% year over year and revenues fell 23%. It’s because of lower smartphone sales as the 5G upgrade cycle ended and economic conditions tightened. Handset chip sales were down 25%. Sales are expected to remain bleak for the rest of 2023.
However, smartphone sales may be close to bottom as they are expected to increase in 2024 and Qualcomm is expected to resume earnings and revenue growth. This slump was expected and that’s why QCOM has underperformed. But it is cheap now at 13 times earnings and this lull in the cycle will certainly end at some point. BUY
Visa Inc. (V)
Yield: 0.8%
V loves the still-strong economy and increasing soft-landing talk. Consumer spending remains strong, and the company reported another impressive quarter. The stock has pulled back after soaring to a 52-week high. But that was expected and why a covered call was sold when V was higher. This is a fantastic stock to own in the longer term and in the near term we can exploit its range and generate a high income. HOLD
The Williams Companies, Inc. (WMB)
Yield: 5.3%
The midstream energy company reported earnings last week that surpassed estimates and the stock got a further boost on the news. Volumes of throughput were solidly higher, and earnings grew 8%. That’s a far cry from the 30%-plus earnings growth of last quarter, but this lull in acquisitions coming online was expected. It’s solid growth under the circumstances. Also, recent expansion and acquisition activity bodes well for growth in 2023 and 2024 beyond what was expected. The stock is now up 20% since the end of May and is within 4% of the 52-week high. BUY
Existing Call Trades
Sell V August 18th $235 calls at $9.00 or better
After hitting a new 52-week high, V has been bouncing around. It’s currently more than $6 per share above the strike price with about ten days to go before options expiration. We’ll see what the stock does and if it is called, but we are generating a strong income from V with the second call sold in this position. It made sense to cash in after this bouncy stock made a new high.
Sell GSL August 18th $20 calls at $1.25 or better
The stock has been impressive. Unlike the past two times, the stock price didn’t pull back after surpassing the $20 per share mark. Then, earnings were solid but the price has been bouncing around and is currently less than a dollar per share above the strike price.
Sell OKE Sep 15th $65 calls at $3.20 or better
The midstream energy company is still flirting right around the strike price. It has performed well in the past couple of months. This week’s earnings should determine the near-term course of the stock price with five weeks to go until options expiration. Either way, we have secured yet another round of great income from this stock.
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 | $121.50 | $130.00 | 2.63% | -5.37% |
| Visa Inc. | V | 12/22/21 | $217.96 | $238.99 | NA | -0.75% | 10.93% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $20.64 | NA | 6.99% | -8.71% |
| Star Buld Carriers Corp. | SBLK | 6/1/22 | $33.30 | $18.28 | NA | 7.66% | -31.36% |
| Intel Corporation | INTC | 7/27/22 | $40.18 | $35.14 | $35.00 | 1.45% | -8.68% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $34.36 | $38.00 | 5.21% | 2.14% |
| ONEOK Inc. | OKE | 3/28/23 | $60.98 | $65.25 | NA | 5.85% | 10.11% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $69.17 | $85.00 | 2.70% | -10.55% |
| Hess Corporation | HES | 6/6/23 | $132.25 | $152.94 | $140.00 | 1.14% | 16.02% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $59.22 | $62.00 | 5.18% | -0.78% |
| Digital Realty Trust | DLR | 7/18/23 | $117.31 | $119.96 | $125.00 | 4.07% | 2.26% |
| AbbVie Inc. | ABBV | 7/25/23 | $141.63 | $147.73 | $150.00 | 4.01% | 4.31% |
| Existing Call Trades | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| V $235 Aug 18th call | V230818C00235000 | Sell | 7/11/23 | $9.00 | $6.31 | $9.00 | 4.13% |
| GSL $20 Aug 18th call | GSL230818C00020000 | Sell | 7/11/23 | $1.25 | $0.86 | $1.25 | 5.00% |
| OKE $65 Sep 15th call | OKE230915C00060000 | Sell | 7/25/23 | $3.20 | $2.60 | $3.20 | 4.92% |
| as of close on 8/04/2023 | |||||||
| 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 | 4/14/22 | $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% |
| ONEOK, Inc. | OKE | Called | 5/25/22 | $65.14 | 1/20/23 | $65 | 2.66% |
| Xcel Energy, Inc. | XEL | Called | 10/26/22 | $62.57 | 1/20/23 | $65 | 4.67% |
| Realty Income Corp. | O | Called | 9/28/22 | $60.37 | 2/17/23 | $63 | 5.41% |
| Medical Properties Trust | MPW | Sold | 1/24/23 | $13.22 | 3/21/23 | $8 | -38.00% |
| Brookfield Infrastructure Cp. | BIPC | Called | 11/9/22 | $42.43 | 7/21/23 | $45 | 8.72% |
| 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 | 9/01/21 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24/21 | $2.30 | 11/19/21 | $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% | |
| OKE Oct 21st $65 call | out-of-money | 8/24/22 | $3.40 | 10/21/22 | $3.40 | 5.22% | |
| OKE Jan 20th $65 call | In-the-money | 11/25/22 | $3.70 | 1/20/23 | $3.70 | 5.68% | |
| XEL Jan 20th $65 call | in-the-money | 11/25/22 | $5.00 | 1/20/23 | $5.00 | 7.99% | |
| O Feb 17th $62.50 call | in-the-money | 12/28/22 | $3.00 | 2/17/23 | $3.00 | 4.97% | |
| QCOM Sep 16th $145 call | out-of-money | 7/20/22 | $11.75 | 9/16/22 | 11.75 | 8.73% | |
| V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/23 | $12.00 | 5.51% | |
| OKE May 19th $65 call | out-of-money | 4/11/23 | $2.70 | 5/19/23 | $2.70 | 4.43% | |
| V Jun 2 $230 call | out-of-money | 4/21/23 | $10.50 | 6/2/23 | 10.5 | 4.82% | |
| BIPC $45 July 21st call | in-the-money | 5/23/23 | $3.25 | 7/21/23 | $3.25 | 7.66% | |