April 23, 2025

Volatility Abounds

The wild ride continues. After a crazy first few weeks of April, this week has continued in the same vein, with a big down day on Monday and a big up day on Tuesday. This might last a while longer.

It’s been a tough market. The S&P started this week down about 6% for the month of April, over 10% YTD, and over 14% from the high. And that was before Monday’s selloff. It is entirely possible that the market falls back to a new low and an official bear market.

The tariff uncertainty is continuing, and it could get worse. A bad headline could roil the market any day. We’re not out of the woods yet. The market could get worse before it gets better. But it will get better at some point.

Investing for dividends and income is a longer-term proposition. Investors typically don’t jump in and out of these stocks in a short time. You have to hold the stock long enough for the dividend to make a difference. Although the market remains troubling in the near term, there are some great opportunities for longer-term investors.

From the perspective of a year or six months out, there are some great bargains in the market. Sure, any given stock might go lower before it goes higher. But if you’re comfortable holding on to a stock for a longer period, it doesn’t really matter that much. Historically, markets like this are a great time to buy and make the likelihood of high returns down the road much more likely than buying into a normal market.

It’s tough to invest in markets like this. It’s like an earthquake. You worry that this market selloff could be “the big one.” This could be the bear market that ruins stocks forever. But it won’t be. Stocks always come back.

Bear markets are quite common. Since 1928, there have been 22 bear markets, according to Standard & Poor’s Corporation. That’s about one every four and a half years. Despite these periodic drops, stocks have trended overwhelmingly higher. In fact, over the last 50 years, the average annual return for the S&P 500 is roughly 11.95% (assuming dividends are reinvested). At that rate, the value of an investment doubles in a little over 6 years. That’s why we put up with bear markets.

It is highly likely that the market is a lot higher by the end of the year. I could probably rate every stock in the portfolio a “BUY.” And it is likely that six months from now most of the stocks will be selling at significantly higher prices than they are now. But most stocks are still rated “HOLD.”

The market could potentially decline for a while still. Instead of risking investing into the market at an inopportune time, we can periodically average back into the stocks and take less downside risk in the near term. I’m also a realist. Even those with the courage to invest into a market this volatile are not likely to jump in with both feet all at once.

The three stocks that I have the most confidence in buying now, even with the possibility of further downside, are Eli Lilly (LLY), AbbVie (ABBV), and Broadcom (AVGO). These stocks are selling at great prices. It’s worth enduring the uncertainty. It’s also possible the market soars at any time and never looks back.

Recent Activity

March 26
AbbVie Inc. (ABBV) – Rating change “BUY” to “HOLD”

April 2
AGNC Investment Corporation (AGNC) – Rating change “BUY” to “HOLD”

April 9
Ally Financial Inc. (ALLY) – Rating change “BUY” to “HOLD”
Qualcomm Inc. (QCOM) – Rating change “BUY” to “HOLD”

April 16
AbbVie (ABBV) – Rating change “HOLD” to “BUY”

High Yield Tier

AGNC Investment Corporation (AGNC – yield 17.6%) Earnings – The mortgage REIT reported earnings on Tuesday morning that beat consensus estimates. The stock jumped by over 3% in early trading. The REIT reported wider spreads as the ten-year Treasury rate has moved higher again, and the Fed is likely to cut the fed funds rate several times this year, perhaps beginning in June. It also posted a total return for the stock of 7.8% in the first quarter. AGNC can’t stand up to a market like we’ve had recently with indiscriminate selling. But it should come back when the market stabilizes. HOLD

Brookfield Infrastructure Partners (BIP – yield 6.1%) – BIP should have been set up for strong relative performance in the recent market volatility. The problem is that interest rates spiked higher at the same time, which is bad for an MLP because it increases borrowing costs and narrows profits. BIP is having a crummy year after two before this. But the business is sound. And yet, the stock isn’t delivering. It’s off the lows but it’s still miles below the early 2022 high. The stock has not been behaving as expected. BIP will continue to be held for now as the price is near the 52-week low and should have a bounce in a decent market. (This security generates a K1 form at tax time.) HOLD

Cheniere Energy Partners, L.P. (CQP – yield 5.6%) – I didn’t think this LNG exporter partnership would be so resilient. Sure, it’s off the high. But not by all that much. CQP is also still up 12% YTD after the recent terrible market. Global natural gas demand remains strong and growing, and Cheniere is the largest U.S. exporter. Regulations are coming down and gas production is being ramped up. It should be in a strong position for the rest of the year after surviving this market in fine shape. (This security generates a K1 form at tax time.) HOLD

Enterprise Product Partners (EPD – yield 7.1%) – Even this stable midstream energy partnership took a hit in the recent market. Nothing is safe when there is indiscriminate selling. But the stock price rebounded and quickly regained its footing. EPD is about even YTD, which is a solid performance in this market. I expect EPD to move back toward the high and probably beyond when the market stabilizes. Enterprise reports earnings later this month and could well get a boost after that. In the meantime, it pays you well to wait. (This security generates a K1 form at tax time.) BUY

FS KKR Capital Corp. (FSK – yield 14.7%) – This Business Development Company (BDC) is cyclical, having a portfolio of small companies, and it suffers when there is angst regarding the economy. It plunged along with everything else earlier this month. But it has come off the recent bottom. If a recession is avoided or the economic narrative doesn’t get ugly, FSK should be okay. It really pays you to wait things out with a better than 14% yield. It will continue to be held for now. Future performance will depend on the economy. HOLD

Main Street Capital Corporation (MAIN – yield 8.1%) – As a BDC, this story is very similar to that of FSK. MAIN pulled back sharply in late February and early March but was moving back up. But like just about everything else, it got pummeled early this month and has been rebounding since. Main’s portfolio of companies not only makes high-interest loans, but it also takes equity stakes. The equity stakes are the primary reason the total returns have been better than just about every other BDC. If the economy hangs on, the BDC should continue to deliver, but if a slowing economy becomes an increasing problem, we’ll have to reevaluate. HOLD

ONEOK Inc. (OKE – yield 5.0%) – OKE tends to be more volatile than the other midstream companies in the portfolio. For much of the past few years that has been a good thing. But lately it’s been a very bad thing. The stock price declined over 20% in April before recovering somewhat. But it’s still down 16% YTD. I’m very bullish on midstream energy companies over the longer term, especially the ones that specialize in natural gas. But OKE has shown no resilience in an ugly market that could get worse before it gets better. It was downgraded to HOLD until things turn around. HOLD

The Williams Companies, Inc. (WMB – yield 3.5%) – This midstream energy company stock seems to keep on rolling no matter what. WMB has bounced around but has maintained its price level despite the recent market. It’s up 10% YTD while the market is down over 12%. It held up better than any of its peers in the down market and is still not far from the 52-week high. WMB will likely continue to march back toward the high and beyond unless the market rolls over again. But regardless, it should be a solid holding over the rest of the year. BUY

Dividend Growth Tier

AbbVie (ABBV – yield 3.9%) – There had been reason to be cautious with ABBV. Very often, the stock pulls back after a surge to new highs. And it did in fact start coming down from its peak. But this market took ABBV, along with just about everything else, way down. The recent plunge gets the stock’s habit of pulling back after a surge out of its system. ABBV is at a great price right now. Sure, it could take a hit again if the market panics. But it should move higher after the market stabilizes. Things have improved as the company has moved beyond the Humira patent loss and has already replaced the revenues. I like the prospects for the stock for the rest of this year. BUY

Ally Financial Inc. (ALLY – yield 4.0%) – This online banker has been bouncing around since late last summer. It had been near the high point of the recent range, but the market took it down this month. If the economy deteriorates toward a recession or close to it, the stock will have more trouble. It deals primarily with auto loans, which are highly cyclical. However, a recession is still unlikely at this point. ALLY was downgraded until this market stabilizes and there is more clarity regarding the economy over the rest of this year. HOLD

Broadcom Inc. (AVGO – yield 1.4%) – Technology has been a lousy place to be lately and AVGO is now down over 30% from the high. Technology stocks that were the hottest a few months ago are taking the worst of the selling. AVGO was a superstar that has recently been in the market’s crosshairs. But AVGO is being dragged down by the sector and the external environment. The company itself is doing gangbusters.

Broadcom soundly beat expectations with 25% revenue growth and 45% earnings growth and raised guidance for the current quarter. AI revenue grew 77% over last year’s quarter, and the company reported that it has scored two more large AI chip customers. The stock price was soaring for a good reason, skyrocketing revenues. That should continue to be the case. AVGO can make up for lost time fast when it moves higher again. And it will at some point. BUY

Cheniere Energy, Inc. (LNG – yield 0.9%) Earnings – The liquid natural gas exporter stock has been spectacular under the circumstances. LNG had been strong ever since the November election as investors anticipated more natural gas exports, increased domestic production, and friendlier regulations. LNG did take a big dip earlier this month as the market ravaged everything, but it has made up all those losses already. LNG is solid in all but the worst markets and should resume the upward trend when the market stabilizes. It has the look of a stock that wants to go higher. HOLD

Constellation Energy Corporation (CEG – yield 0.9%) – This nuclear provider of electricity has come off the bottom but is still in sorry shape compared to where it was. CEG had been one of the hottest stocks on the market until late January. The electricity trade unwound after the DeepSeek news, and then all Hell broke loose with the tariffs. CEG soared and crashed. The market overdid it on the buy side and now it’s overdoing it on the sell side. Meanwhile, the company itself is doing great. Electricity demand is sure to grow. The two huge recent deals (the Microsoft (MSFT) deal and the Calpine acquisition) will deliver a high level of earnings growth in the years ahead and there may be more new deals coming. The market will regain its footing at some point and CEG can come back fast. HOLD

Digital Realty Trust, Inc. (DLR – yield 3.3%) – This data center REIT was hot stuff until technology stocks started selling off. DLR hit the 52-week high at the end of November and has been trending downward ever since, although it has moved sharply off the bottom in recent weeks. But the business itself is still booming. The weakness should end when the technology sector recovers. DLR probably got a little too high too fast. But the future still looks extremely bright. Data center growth will continue to be a strong trend as the recent troubles probably fade into memory. HOLD

Eli Lilly and Company (LLY – yield 0.8%) – There was big news last week and LLY rallied over 14% in one day on Friday, even in this crummy market. Lilly reported successful results of a late-stage (stage III) trial for the oral weight-loss drug Orforglipron. The oral drug is far more desirable for patients than an injection and it’s cheaper to make too. It could be a game-changer in the weight-loss drug space, which is projected to earn $130 billion annually by 2030. The company expects to submit the drug for FDA approval later this year. Even after the surge, LLY still sells well below the 52-week high with earnings booming and projected to grow 80% this year. BUY

McKesson Corporation (MCK – yield 0.4%) – What tariff trouble? What treacherous market? MCK has just continued trending higher all year. It’s even up for the month of April and has returned 23% YTD in a treacherous market. It is also one of the very few portfolio stocks still trading near the high. The stock had been knocked down last summer and fall after the company reported supply chain issues with weight-loss drugs. But those problems are behind the company. MCK has resumed its old habit of slowly going higher and higher as it deals in a market that grows all by itself because of the aging population. It should continue to be a great holding in any market. BUY

Qualcomm Inc. (QCOM – yield 2.6%) – Technology has not been a good place to be. QCOM had been holding up okay because it was underperforming before the market rolled over. But this month took no prisoners, and QCOM got whacked. But it has come off the low from earlier this month. Although the stock is already beaten to a pulp, it could fall further if the market makes a new low. However, QCOM can make up for lost time when it moves higher, and it will eventually. The company is still in an ideal position to provide AI-enabled chips for mobile devices, including smartphones. It should be a beneficiary of the next wave of AI. HOLD

Toll Brothers, Inc. (TOL – yield 0.9%) – TOL moved 5% higher by midday on Tuesday after the company announced several luxury home communities coming soon. The luxury homebuilder stock actually fared alright in the recent market crash. That’s probably because the stock was beaten to a pulp before the tariff selloff. However, rates started moving higher again and the solid relative performance floundered. The longer-term supply/demand dynamic is hugely favorable to this company, and it will rebound eventually. HOLD

UnitedHealth Group Inc. (UNH – yield 2.0%) Earnings – We can add another chapter in the barrage of bad news for this company. The company reported earnings last Thursday that missed estimates and lowered earnings guidance for 2025, from $29.50 - $30 to $26 - $26.50. The market wasn’t happy about it and UNH crashed more than 22% in a day, the worst day for the stock since 1998. The vague management statements that followed didn’t help as the company cited higher medical costs from rising usage by older clients and “unanticipated changes” in its Optum subsidiary, the growth engine of the company.

The stock has been lamely rebounding from the carnage. It’s also true that 27 of 29 analysts covering the stock still rate it a “BUY.” UNH had a stellar track record, but it has been one thing after another in recent years. Perhaps the rebound will continue as value hunters nibble. But this stock was supposed to prove its worth in markets like this, which it had been doing. After a rebound, I will consider shooting this pig and selling it. HOLD

Waste Management, Inc. (WM – yield 1.4%) – The garbage king is delivering as advertised so far. It faced a huge defensive test shortly after being added to the portfolio and it passed. WM did fall sharply early this month but has since gained back nearly all of the losses already. WM is also one of the few portfolio stocks that is trading close to the high. You can depend on garbage. As the market plunges and uncertainty swirls, investors are attracted to safety and the relative performance of stocks like WM tends to thrive. Of course, this stock also has a good track record in bull markets. It’s a good holding if the market turns around too. BUY

Safe Income Tier

NextEra Energy (NEE – yield 3.5%) – Even the safe stocks are getting pummeled. As a utility, NEE has held up relatively well in the recent market. But it hasn’t been that great because interest rates have risen again. NEE is still down, just not as much as most stocks. But NEE should have less downside than the overall market from here. And it should be a desirable stock when investors come back to buying and demand more safety. NEE has also performed well in strong markets. I think NEE will be higher in the months ahead and should provide a smoother rise than most stocks. BUY

USB Depository Shares (USB-PS – yield 6.2%) – The recent turbulence should have been a good time for fixed income. But interest rates spiked along with the stock market volatility. As a result, this preferred stock plunged to a new 52-week low. The combination of economic uncertainty and rising interest rates took the stock down. However, it should regain traction when the market stabilizes. The risk is spiking interest rates, which seems unlikely at this point. BUY

Vanguard Long-Term Corp. Bd. Index Fund (VCLT – yield 5.1%) – Ditto for VCLT. The long-term corporate bond ETF loves falling interest rates and hates rising ones. There will be more price pressure if rates continue to rise and vice versa. But the situation over the course of the year should be good. BUY

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