More Good News
The market looks great. The quarter ended last week with the S&P posting the strongest first-quarter start in five years. All three major market indexes have now risen for five straight months.
The Fed said it still intends to cut the Fed Funds rate three times this year at the March meeting. Meanwhile, inflation remains subdued, and the economy is surprisingly strong. Manufacturing data was much better than expected and the Fed raised its GDP forecast for 2024 from 1.4% to 2.4%.
Of course, the strong economy somewhat dampens the rate cut projections. Odds of a first rate cut at the Fed’s June meeting have now moved below 50% and the market is starting the week on a lower note. But a stronger economy for a slightly later rate cut start should be a good trade for the overall market this year.
We’ll see how this inflation/interest rate scenario plays out in the quarters ahead, but things look good for now. The only thing wrong with the near-term market prognosis is that the rally might be getting a little long in the tooth. The S&P has rallied 10% already this year and is up over 28% since late October. A consolidation of some sort would be normal at this point even with a positive outlook for the rest of the year.
The surprisingly strong stock market has led to many recent covered call sales resulting in the stocks being called, as they have moved beyond the strike price by the options expiration date. But we were still able to lock in a strong income and get a solid total return. Generating a high income comes at the expense of potential capital appreciation. Fast-rising markets will result in more stocks being called.
There are still opportunities developing for more covered calls in existing stock positions and more stocks are rising near or above the 52-week highs. Stay tuned for “Trade Alerts” in your email.
Past Month Activity
March 5
Xcel Energy Inc. (XEL) – Rating change “BUY” to “HOLD”
March 12
Sold QCOM April 26 $170 calls at $10.00 or better
Sold WMB May 17 $35 calls at $2.00 or better
March 15
ABBV March 15 $160 calls at $7.00 – Expired
AbbVie Inc. (ABBV) stock – Called
March 28
MPC March 28 $165 calls at $10.00 – Expired
Marathon Petroleum Corporation (MPC) stock – Called
Portfolio Recap
Alexandria Real Estate Equities, Inc. (ARE)
Yield: 4.0%
This one-of-a-kind life science property REIT is back in business. It was hot late last year. Then it pulled back in the early part of this year. But it has been moving back up since the middle of February and has made up just about all of the earlier year losses. The recent good interest rate news has reignited ARE. It is likely that interest rates have peaked and will trend lower throughout the year or at least just stay where they are. ARE is a great income stock selling at the low end of historical valuations while the company is consistently growing revenues and profits from its niche properties. I’m expecting a good year for ARE and a solid income. BUY
American Tower Corporation (AMT)
Yield: 3.3%
AMT had been rallying after a bad start to the year until recently. It has been turning south for a couple of weeks. The reason is that the company cut the dividend by 4.7% to focus on debt reduction. It sounds worse than it is. It just lowered the dividend to the third-quarter level, which was the third quarterly increase for 2023. It’s dumb to negate the fourth-quarter increase, but the current dividend is still higher on a year-over-year basis. The reversal of the fourth-quarter hike is a headscratcher that shouldn’t affect the stock’s trajectory over the course of the year. It’s still one of the best REITs on the market that deals in very high-quality properties. BUY
Brookfield Infrastructure Corp. (BIPC)
Yield: 4.6%
It’s been an uncharacteristically bad two years for Brookfield. The inflationary and rising interest rate environment beat up the utility sector and BIPC wasn’t spared. But it is unlikely that rates will continue to move higher. There has also been encouraging behavior recently. BIPC soared along with many other dividend stocks in the last two months of last year but, unlike many similar stocks, it didn’t pull back this year. It just kind of went sideways instead. Brookfield has some of the most defensive revenues possible. It’s also been expanding into cell towers, data centers and foundries. Meanwhile, Brookfield continues to deliver strong operational results. BUY
Enterprise Products Partners L.P. (EPD)
Yield: 7.0%
The midstream energy partnership just hit a new 52-week high. These are good times for midstream energy stocks. Oil and gas demand remains strong while the high dividends separate them from the more interest rate-sensitive lower-yielding stocks. EPD is already up about 12% YTD. Looking forward, the company should deliver solid growth this year with anticipated steady hydrocarbons demand and recent acquisitions coming online. That massive distribution is extremely well supported, and the stock is still well below the all-time high despite much higher earnings. (This security generates a K1 form at tax time). BUY
Main Street Capital Corporation (MAIN)
Yield: 6.1%
Although this newest portfolio addition is currently selling near the 52-week high, it is still reasonably priced at less than 1.6 times book value and with most other valuation measures below the five-year average. It also pays that safe and high dividend every single month with a strong possibility of supplemental dividends over the course of the year as well. MAIN should also provide strong total returns over time generated by its largely successful small business portfolio. BUY
NextEra Energy, Inc. (NEE)
Yield: 3.2%
NEE has been moving higher this month. After moving with the ebb and flow of other defensive dividend stocks late last year and early this year, it has moved back to the high before this year’s earlier selloff. It had been a superstar performer before inflation and rising interest rates. It provides both safety from its best-in-class regulated utility business and growth from its considerable clean energy business. The utility reported strong earnings that exceeded expectations again last month and reiterated its growth projections for this year, near the top of the estimated range. The interest rate-related weakness should at least diminish going forward as rates have likely peaked. BUY
Qualcomm Corp. (QCOM)
Yield 1.9%
Qualcomm is secretly one of the best semiconductor and AI stocks to own. It had been held back by cyclicality, both in semiconductors and smartphones. But the negative cycle is ending, and AI is coming to mobile devices. QCOM cooled off after a huge rally in which it had risen 22% YTD and 65% since late October. It looks like the mobile device chip maker will simply bounce around with the technology sector in the near term. A breather would probably be a healthy thing for the stock. But the rest of the year looks strong as Qualcomm is also introducing new AI chips for PCs and smartphones and is well positioned for the next phase of the AI craze. BUY
Realty Income Corp. (O)
Yield: 5.7%
This beleaguered stock could finally be getting some upward traction. It has moved out of the recent sluggish range near the bottom on the rally in more interest rate-sensitive stocks. O has consistently and historically been one of the very best income stocks to own of all time. The monthly dividend has been raised every year since 1969. But the last two years of inflation and rising interest rates have been among the worst two years in this stock’s history. That makes it dirt cheap ahead of an environment that will almost surely get much better. It’s probably the very late innings for rising and high interest rates and O is well positioned ahead of a likely shift in the future. BUY
The Williams Companies, Inc. (WMB)
Yield: 4.9%
It’s a new high for this midstream company stock too. After going sideways for many months, WMB has broken out since the middle of February. Energy stocks are hot and midstream companies are mostly selling near multi-year highs. It’s a stable high-yield stock and the company should deliver solid and dependable earnings in just about any economy. Business remains solid and not dependent on commodity prices. It pays a well-supported dividend, and recent acquisitions and expansions ensure more solid growth going forward all the way out to 2028. BUY
Xcel Energy Inc. (XEL)
Yield: 4.1%
The alternative energy utility had a terrible time last month. The stock crashed 14% after it was reported that Xcel could be held liable for damages for the raging Texas wildfire, which is the worst in the state’s history and encompasses a land mass larger than the state of Rhode Island. Several utilities have been held liable for wildfires in recent years. Xcel has admitted that its equipment was likely involved in igniting the blaze. This weird development is also ongoing, and the scope of the damage is not known. NEE was downgraded to a HOLD until there is more clarity on the matter. The stock has bounced higher since the initial decline and has held steady. HOLD
Existing Call Trades
MPC March 28 $165 calls at $10.00 – Expired
Call premium: $10.00
Dividends: $1.65
Appreciation: $15.55 ($165 strike price minus $149.45 purchase price)
Total: $27.20 (total return of 18.2% in 5 months)
MPC ran away after the calls were sold. It was at a high at that time and I did not foresee the strong rally in the energy sector over the past six weeks. Energy is the number one performing sector on the S&P over the past month as energy prices have rallied strongly. But we still secured a great income and a strong total return in a short amount of time.
Sell QCOM April 26 $170 calls at $10.00 or better
Calls expire later this month and the stock just moved above the strike price this week after showing signs of consolidation. QCOM should have a good year, but we will have to see if the bright future is outweighed by this rally getting too long in the tooth in the short term.
Sell WMB May 17 $35 calls at $2.00 or better
Energy continues to be red hot and this normally very slow-moving stock has hit a series of new highs and is trading nearly 4 per share above the strike price. There is still a long way to go before options expiration. The stock could pull back if the energy sector or the overall market pulls back in the next couple of months. But either way, we will secure a good income.
Current Recommendations
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Alexandria Real Estate Eq. | ARE | 12/19/23 | $129.54 | $128.91 | $140.00 | 3.98% | 1.49% |
| American Tower Corp. | AMT | 1/23/24 | $202.26 | $197.59 | $220.00 | 3.28% | -2.31% |
| Brookfield Infrstr. Cp. | BIPC | 2/27/24 | $32.64 | $36.04 | $40.00 | 4.60% | 8.82% |
| Enterprise Products Ptnrs. | EPD | 2/27/24 | $27.61 | $29.18 | $30.00 | 6.87% | 4.69% |
| Main Street Capital Corp. | MAIN | 3/26/24 | $46.40 | $47.31 | $50.00 | 6.09% | 1.96% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $63.91 | $65.00 | 3.23% | -15.32% |
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $169.30 | $165.00 | 1.89% | 34.31% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $54.10 | $62.00 | 5.70% | -5.78% |
| The Williams Companies | WMB | 8/24/22 | $35.58 | $38.97 | $38.00 | 4.88% | 20.45% |
| Xcel Energy Inc. | XEL | 8/22/23 | $57.95 | $53.75 | NA | 4.07% | -4.64% |
| Call Trades | |||||||
| Open Recommendations | Ticker Symbol | Initial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| QCOM Apr 26th $170 call | QCOM240426C00170000 | Sell | 3/12/24 | $10.00 | $9.50 | $10.00 | 7.43% |
| WMB May 17th $35 call | WMB240517C00035000 | Sell | 3/12/24 | $2.00 | $3.61 | $2.00 | 5.62% |
| as of close on 03/28/2024 | |||||||
| SOLD STOCKS | |||||||
| X | 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 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95 | 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% |
| Star Bulk Carriers Corp. | SBLK | Sold | 6/1/22 | $33.30 | 8/8/23 | $18 | -31.38% |
| Visa Inc. | V | Called | 12/22/21 | $217.16 | 8/18/23 | $235 | 9.16% |
| Global Ship Lease, Inc. | GSL | Sold | 2/23/22 | $24.96 | 8/29/23 | $19 | -13.82% |
| ONEOK, Inc. | OKE | Called | 3/28/23 | $60.98 | 9/15/23 | $65 | 9.72% |
| Hess Corporation | HES | Called | 6/6/23 | $132.25 | 10/20/23 | $155 | 17.87% |
| Tractor Supply Company | TSCO | Sold | 9/26/23 | $203.03 | 11/28/23 | $200 | -1.02% |
| Digital Realty Trust | DLR | Called | 7/18/23 | $117.31 | 1/19/24 | $135 | 17.16% |
| Intel Corporation | INTC | Called | 7/27/22 | $40.18 | 1/19/24 | $43 | 9.76% |
| AbbVie Inc. | ABBV | Called | 7/25/23 | $141.63 | 3/15/24 | $160 | 15.11% |
| Marathon Petroleum Corp. | MPC | Called | 10/24/23 | $149.45 | 3/28/24 | $165 | 12.06% |
| 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 | 9/1/21 | $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 | $10.50 | 4.82% | |
| BIPC $45 July 21st call | in-the-money | 5/23/23 | $3.25 | 7/21/23 | $3.25 | 7.66% | |
| V $235 Aug 18th call | in-the-money | 7/11/23 | $9.00 | 8/18/23 | $9.00 | 4.13% | |
| GSL $20 Aug 18th call | out-of-money | 7/11/23 | $1.25 | 8/18/23 | $1.25 | 5.00% | |
| OKE $65 Sep 15 call | in-the-money | 9/15/23 | $3.20 | 7/25/23 | $3.20 | 4.92% | |
| INTC $35 Oct 20th call | out-of-money | 9/8/23 | $3.78 | 10/20/23 | $3.78 | 9.41% | |
| HES $155 Oct 20th call | in-the-money | 9/8/23 | $9.00 | 10/20/23 | $9.00 | 6.81% | |
| DLR $135 Jan 19th call | in-the-money | 11/22/23 | $6.00 | 1/19/24 | $6.00 | 5.11% | |
| INTC $42.50 Jan 19th call | in-the-money | 11/29/23 | $3.50 | 1/19/24 | $3.50 | 8.71% | |
| ABBV $160 Mar 15th call | in-the-money | 1/10/24 | $7.00 | 3/15/24 | $7.00 | 4.94% | |
| MPC $165 Mar 28th call | in-the-money | 2/14/23 | $10.00 | 3/28/24 | 10 | 6.69% | |
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