We have several uncovered stock positions in the portfolio. With the recent market gains, we can sell some covered calls today.
Blackstone (BX): 84.14
Blackstone is tricky. We’ve always liked the company for its strong management team, best-practices approach to acquisitions and investments in new markets, and its unique position outside of the traditional financial institutional structure. But Blackstone is susceptible to negative moves in financial stocks (like banks), and we expect further turmoil in that sector.
The stock continues to hold in the 82-to-84 range and has traded higher over the past four days. The company is scheduled to report earnings on April 20, resulting in elevated premiums we can capture with a covered call.
ACTION: Sell to open BX 21 Apr 89 call for a net credit of around 1.07 to 1.12
NEW MEMBERS: If you do not own BX, buy shares at market and sell the BX 21 Apr 89 call.
CF Industries (CF): 76.76
As a low-cost producer of nitrogen fertilizers, CF Industries benefited from the shortage in fertilizer products in 2022. While demand in that market has softened, along with the stock price, the company’s free cash flow continues to improve, making it a real value play. Currently trading with a forward P/E of 6.63, CF has room to run as earnings grow.
The stock has traded higher in seven out of the past 10 trading days, giving us a chance to sell a covered call at the monthly expiration.
ACTION: Sell to open CF 21 Apr 80 call for a net credit of around 1.05 to 1.10.
NEW MEMBERS: If you do not own CF, buy shares at market and sell the CF 21 Apr 80 call.
Kraft Heinz (KHC): 39.25
Kraft Heinz is one of our two food producer stocks that has struggled due to inflation. While sales softened recently in some of its product lines, price increases have led to higher margins for the company.
This stock is a classic value play. Slower growth and modest EPS improvements allow KHC to continue to support a 4%-plus dividend yield.
We have left KHC uncovered as the stock traded lower during the first quarter, but we’ve now seen more than a week of higher prices, giving us a chance to get back in with a covered call. While KHC’s premiums are smaller than with some of our other stocks, we can still collect a reasonable credit.
ACTION: Sell to open KHC 5 May 41 call for a net credit of around 0.30 to 0.33.
NEW MEMBERS: If you do not own KHC, buy shares at market and sell the KHC 5 May 41 call.