Exploit the Still Strong Economy
The market is still in a downtrend that began at the end of July. But the S&P 500 is only down a little over 7% over that time. And there is reason for optimism.
Inflation is falling. The Fed is almost done hiking rates. And there is absolutely no sign of recession. It looks like we might just get through the rate hiking cycle without the normal economic pain. At the same time, the last two months of the year are historically strong for stocks.
But there are looming issues that could spoil the party. The situation in the Middle East could escalate at any time. A wider crisis could trump everything else and spook the market. There’s also interest rates. The benchmark 10-year Treasury yield is on the cusp of 5%, a 16-year high and an important psychological level.
The strong economy also brings the disadvantage of higher interest rates. Strong growth tends to be bad for inflation and investors are pricing in rates that stay higher for longer. That’s spooking the market right now. But a stronger-than-expected economy also has opportunities.
It’s tough to predict the next few quarters. But what seems to be quite clear is that the economy is solid for now. Third-quarter GDP is expected to be over 5%. Even if the economy does slow, it will likely take several quarters to slow from here. That means gasoline demand should remain solid. And that should be good news for refiners.
In this issue I highlight one of the best performing large company stocks in the energy sector over the last several years. It is also one of the few plays out there that still has solid momentum, as the stock remains in an uptrend that began three years ago.
Good momentum means high call premiums as more investors are willing to be on higher prices in the future. The refiner stock highlighted below has a great chance of providing a great opportunity to sell covered calls in the near future. It should help generate a high income in this uncertain environment.
What to Do Now
This is a tough market environment. The “soft landing” optimism is being tempered by rising interest rates. There is a risk that either the current high rates slow the economy eventually, or they rise further until they do.
Anything is possible. Rates could be peaking. The worst may pass, and rates could start to move lower without a recession. It’s hard to know. Next year we could be in a raging bull market or bounding toward a recession. And the type of environment has a huge impact on how different stocks and sectors perform.
In terms of stocks, the safe stocks that have been destroyed offer compelling valuation that should manifest in higher prices in the quarters ahead. Safe stocks including Realty Income (O), NextEra Energy (NEE), and Xcel Energy (XEL) are all selling near multi-year lows after a brutal year so far.
The problem is interest rates. These companies are in businesses that tend to carry higher levels of debt. Higher rates for longer will eventually impact financing costs and perhaps limit growth potential. In addition, competing fixed income investments become more attractive as interest rates climb.
But these stocks have already been bludgeoned to the point that even slower growth has already been more than factored into the stock prices. Good stocks selling near the lowest valuation ever are likely to bounce back in the months ahead. There is a good chance that the prices move a lot higher in the months ahead, and they represent compelling value in an uncertain market.
Good call prices have been hard to come by lately as the down-trending market makes fewer investors willing to bet on higher prices going forward. But some stocks continue to thrive and offer momentum that can be turned into income from call premiums in a relatively short period of time.
There are several cyclical positions that could take off if the market rallies again. But some stocks have momentum already. One such stock is Williams Companies (WMB), the midstream energy company.
Rising rates haven’t seemed to bother this stock sector. The dividend is high, and earnings have been rock solid. It’s a good stock to buy now because if the market continues to flounder, it should stay relatively buoyant while paying a high dividend yield. At the same time, it has a good chance of thrusting higher if the market regains traction.
Monthly Recap
September 26
Sell DLR October 20 $130 at $6.00 – Remove
Purchased Tractor Supply Company (TSCO) - $203.03
October 2
NextEra Energy (NEE) - Rating change “BUY” to “HOLD”
October 20
HES October 20 $155 calls at $9.00 – Expired
Hess Corporation stock (HES) – Called
INTC October 20 $35 calls at $3.78 – Expired
October 24
Buy Marathon Petroleum Corporation (MPC)
Featured Action: Buy Marathon Petroleum Corporation (MPC)
Marathon in the largest energy refiner in the U.S. with 16 refineries across the country and 3.1 million barrels a day in throughput capacity. The company also markets finished products to 7,100 locations throughout the country and gathers and processes oil and gas through its Midstream subsidiary MPLX (MPLX).
Marathon became the country’s largest refiner after its 2018 acquisition of independent refiner Andeavor. The purchase greatly enhanced the geographical reach and the company’s ability to take advantage of price spreads between producers and end users. The acquisition increased earnings and resilience during tough markets. Marathon also did a very good job in reducing its per-barrel operating costs and increasing the complexity and quality of its refineries.
The increased complexity enhances Marathon’s ability to process lower-quality, lower-cost heavy and sour crude into high-value “clean” products such as gasoline and diesel. U.S. refiners have a big advantage over other countries. They can refine lower-cost crude oil and gas and charge higher overseas rates. Marathon’s increasing ability to press that advantage has led to stellar results.
Over the past three years, MPC has returned a whopping 456% compared to a 27% return for the S&P 500 over the same period. While the past three years have been unusually good for energy companies, MPC also blew away the performance of its industry peers. It also vastly outperformed its sector and the overall market in the last five- and 10-year periods.
Refining spreads have shrunk since the sizzling market of last year as crack spreads have narrowed throughout the industry. Marathon’s earnings nearly halved in the last quarter to $5.32 per share. But it was nevertheless still the fifth-best quarter in company history and the stock is still up over 30% YTD.
The dividend yield is currently about 2%. But the dividend payout is under 20% with room to grow. In fact, the company raised the dividend by 30% this year and also reduced share count by 24% through share buybacks. Price-to-earnings ratios are well below the five-year averages despite the strong recent performance.
The economy remains strong and that should support solid refined product demand in the quarters ahead. Although the stock price has leveled off since August, MPC remains in a strong uptrend that began about three years ago.
The dividend yield is relatively lame but the stock fetches high call premiums when it starts to move higher.
Marathon Petroleum Corporation (MPC)
Security type: Common stock
Sector: Energy (refining)
Price: $150
52-week range: $104.32 - $159.50
Yield: 2.0%
Profile: Marathon is the largest oil refiner in the U.S.
Positives
· Demand for gasoline and diesel remains strong in the still solid economy.
· U.S. refiners have a big advantage in lower feedstock prices from cheaper oil.
· Marathon has a proven ability to generate huge cash flow and deliver great stock returns in the current environment.
Risks
· A recession would curtail demand and have a negative effect on the stock price.
· Margins are dependent on erratic commodity prices.
Marathon Petroleum Corporation (MPC)
Next ex-div date: November 15, 2023, est.
Portfolio Recap
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 | $108.63 | $130.00 | 2.95% | -14.80% |
Intel Corporation | INTC | 7/27/22 | $40.18 | $34.92 | $35.00 | 1.43% | -9.25% |
The Williams Companies | WMB | 8/24/22 | $35.58 | $34.92 | $38.00 | 5.13% | 5.18% |
NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $51.96 | NA | 3.60% | -32.94% |
Realty Income Corp. | O | 6/27/23 | $60.19 | $49.35 | $62.00 | 6.22% | -16.51% |
Digital Realty Trust | DLR | 7/18/23 | $117.31 | $115.81 | $125.00 | 4.21% | -0.34% |
AbbVie Inc. | ABBV | 7/25/23 | $141.63 | $146.23 | $150.00 | 4.05% | 4.28% |
Xcel Energy Inc. | XEL | 8/22/23 | $57.95 | $58.10 | $65.00 | 3.58% | 1.15% |
Tractor Supply Company | TSCO | 9/26/23 | $203.03 | $195.27 | $215.00 | 2.11% | -3.82% |
Existing Call Trades |
| ||||||
Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
as of close on 10/20/2023 | |||||||
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 | $100.00 | 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% |
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//2023 | $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% |
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% | |
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 | 7/20.2022 | $11.75 | 9/16/22 | $11.75 | 8.73% | |
V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/203 | $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% | |
AbbVie Inc. (ABBV)
Yield: 4.1%
The future looks good. AbbVie has one of the best new drug pipelines in the business at a time when the population is aging at warp speed. The megatrend tailwind combined with the quality drugs and treatments should produce strong longer-term gains. But revenues are falling this year as the company has lost patent exclusivity for the blockbuster Humira drug in the U.S. So far, ABBV is weathering this challenging year OK with a -10% YTD return.
Shrinking Humira revenues should be overcome with its strong new drugs and pipeline in the future. If AbbVie can follow last quarter’s positive earnings surprise when it reports this Friday (October 27), the stock could surge higher as investors sense that it might turn the Humira corner sooner. BUY
AbbVie Inc. (ABBV)
Next ex-div date: January 12, 2024, est.
Digital Realty Trust (DLR)
Yield: 4.2%
The spike in interest rates since late summer has pulled DLR down from the high. Rates hurt both technology stocks, as growth projections shrink from higher costs, and REITs, as competing fixed rate investments become more competitive. But business is strong, and the AI craze will add another growth catalyst in the quarters and years ahead. It’s also possible that interest rates are peaking. The company reports earnings at the end of the week (Thursday) and a good report could give DLR a lift. BUY
Digital Realty Trust, inc. (DLR)
Next ex-div date: December 15, 2023, est.
Intel Corp, (INTC)
Yield: 1.4%
Interest rate angst is again dragging the stock price lower. INTC seems to want to go higher in all but the toughest environments for technology stocks, which it has been lately as the benchmark 10-year Treasury is flirting with the psychologically important 5% level. The stock had a huge spike higher in the late summer and a pullback after such a move is normal, especially in a lousy market. The fact that INTC is avoiding falling back into the abyss inspires confidence that the stock is cheap ahead of a brighter future and investors are interested. The earnings report this Thursday (October 26) could give the stock a boost despite the current tough external environment. BUY
Intel Corporation (INTC)
Next ex-div date: November 4, 2023, est.
NextEra Energy, Inc. (NEE)
Yield: 3.6%
Just when NEE made a convincing move off the bottom, rising interest rates are retaking center stage. While NEE has only pulled back in a minor way over the past week, the ascent that was in progress has been stymied for now. Lower earnings growth has already been factored into the stock price, even though that may not even happen – earnings are due out tomorrow (Tuesday). The stock can’t power through a market that is obsessed with rising interest rates. But as soon as the panic abates, NEE should move higher again, especially if there is a positive earnings report later this week. HOLD
NextEra Energy, Inc. (NEE)
Next ex-div date: November 22, 2023
Realty Income Corp. (O)
Yield: 6.2%
This rock solid, legendary income REIT has not lived up to its reputation of late. O is still wallowing near the lowest price for the REIT since the pandemic bear market more than three years ago. Defensive stocks have been poor performers all year. But operational performance has been sound as earnings were solid. O had been moving off the low until high interest rates started spooking the market again. Maybe a great track record and a 6% dividend can perk enough investor interest to drive the stock higher from here. BUY
Realty Income Corporation (O)
Next ex-div date: October 31, 2023
Tractor Supply Company (TSCO)
Yield: 2.1%
The farm and ranch retail company stock is well off the high made in April. Investors are worried about the continued resiliency of the consumer. But Tractor’s rural consumers have already been weak for a while and the company has been successfully compensating with its vast array of staple products. Last quarter, the company delivered 8.5% EPS while average S&P 500 earnings were down. The strong consumer staple element makes TSCO more of a consumer staples stock, and the market has shunned defensive plays of late. The company reports earnings later this week (Thursday) and a good report might get the stock moving higher again. BUY
Tractor Supply Company (TSCO)
Next ex-div date: November 25, 2023, est.
Qualcomm Corp. (QCOM)
Yield: 2.9%
The chipmaker stock continues to struggle through this year. The sector was being driven by stocks with exposure to AI until interest rates spoiled the party. It’s a little soon for Qualcomm to benefit from AI upgrades, as they haven’t made the way into smartphones yet. The company is highly dependent on smartphones. And sales have been falling as the 5G cycle comes to an end and the global economy is sputtering. But smartphone sales may have bottomed out. The stock sells at a forward P/E ratio below 11 times, which is cheap considering the cycle and the growth opportunities in internet of things and other AI applications. BUY
Qualcomm Inc. (QCOM)
Next ex-div date: November 29, 2023
The Williams Companies, Inc. (WMB)
Yield: 5.1%
The midstream energy company made a new 52-week high last week but has since pulled back a little in the turbulent market. Midstream energy companies that pay dividends have held up relatively well in the market despite rising interest rates. While other more defensive dividend-paying stocks are struggling, midstream energy companies have been rolling merrily along. It is likely that strength in the more commodity price-sensitive energy stocks is helping the stock. It also operates in an inflation-resistant business and revenues should remain solid even in a slow economy. BUY
The Williams Companies, Inc. (WMB)
Next ex-div date: December 8, 2023, est.
Xcel Energy Inc. (XEL)
Yield: 3.6%
Despite the turbulence of last week, the dark days for utilities may be coming to an end. The lows may be in. XEL had a convincing 10% move off the low. This is one of the best utility stocks to own and the recent weeks’ debauchery may prove to be very temporary. XEL is now selling close to the pandemic bear market lows of three years ago ahead of a likely slowing economy. Even if interest rates do hurt earnings (out this Friday, October 27), the damage is already priced into this stock. BUY
Xcel Energy Inc. (XEL)
Next ex-div date: December 15, 2023, est.
Existing Call Trades
HES October 20 $155 calls at $9.00 – Expired
Call premium: $9.00
Dividends: $0.875
Appreciation: $22.50 ($155 strike price minus $132.50 purchase price)
Total: $32.38 (total return was 24.4% in 4 ½ months)
Shares were called away at options expiration on Friday as the stock closed $8 per share above the strike price. While oil prices did peak around the time the calls were sold, turmoil in the Middle East along with a promising earnings report later this week kept the stock at a higher level. The trade was successful as it returned over 24% in just four and a half months while the S&P 500 was down 0.88% over the same period.
INTC October 20 $35 calls at $3.50 – Expired
Call premium: $3.78
Dividends: $1.27
Total: $5.05 (total income of 12.6% in 15 months)
Shares closed just a few pennies below the strike price on Friday and avoided being called by a whisker. INTC is a stock that has seemed like it wants to go higher in all but the most challenging environments for technology stocks. As INTC gets close to the original purchase price, these calls provided a huge 9.41% income.
Income Calendar
Ex-Dividend Dates are in RED and italics. Dividend Payments Dates are in GREEN. Confirmed dates are in bold, all other dates are estimated. See the Guide to Cabot Income Advisor for an explanation of how dates are estimated.
The next Cabot Income Advisor issue will be published on November 21, 2023.
