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Income Advisor
Conservative investing. Double-digit income.

January 16, 2024

The market surge has leveled off. The expectation debate about peak interest rates, inflation, and recession continues. And now, it’s another earnings season.

The S&P 500 pulled back during the first trading week of the year after a two-month, 15% spike. In the second week, the index gained back everything it lost the first week. He we are again on the cusp of the all-time high set about two years ago.

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Earnings Change the Focus

The market surge has leveled off. The expectation debate about peak interest rates, inflation, and recession continues. And now, it’s another earnings season.

The S&P 500 pulled back during the first trading week of the year after a two-month, 15% spike. In the second week, the index gained back everything it lost the first week. He we are again on the cusp of the all-time high set about two years ago.

The focus should move somewhat away from Fed rate cuts and slowing economy expectations and more toward earnings. That’s a good thing. Because nobody really knows any more about rates or the economy than they did a month ago and earnings usually give stocks a boost. Companies are good at managing expectations so that earnings always look decent. Hopefully, a positive season will reignite a rally and boost stocks to new territory.

Of course, investors will be interested in what earnings say about inflation and the economy. If earnings and expectations are too strong, it could prompt fears of lingering inflation and wreck the hope of Fed rate cuts. That could be negative. If companies have negative things to say about the economy, it could create fear of recession and falling earnings. That could be bad too.

The market will be looking for the Goldilocks scenario on the macro front where earnings stay solid but there isn’t enough inflation or economic strength to discourage the Fed from lowering rates this year. We’ll see. It may sound far fetched but I would be typical of the market to pull that off.

In the meantime, the portfolio will focus on broader trends that are likely to prevail regardless of near-term market gyrations. Interest rates have likely peaked in this cycle. It is unlikely that longer rates revisit and eclipse the highs of late October. That should continue to be positive for defensive dividend-paying stocks which are still cheap and have some positive momentum.

Technology stocks should continue to rally this year as artificial intelligence adds another growth catalyst in the quarters ahead. The current market highs also present an excellent opportunity to sell covered calls on stocks that have spiked near recent highs. Last week a third call was added.

Past Month Activity

December 19
Purchased Alexandria Real Estate Equities (ARE) - $129.54

January 10
SOLD ABBV March 15 $160 calls at $7.00 or better

Portfolio Recap

AbbVie Inc. (ABBV)
Yield: 3.8%
ABBV had a lackluster 2023 with about an even return for the year. But the stock turned sharply higher since late November and just touched the 52-week high. The future for the company and the stock should be excellent as AbbVie has a strong pipeline of new drugs. But it may not be out of the Humira woods yet as more companies will launch biosimilars in 2024. The market likes that AbbVie is purchasing biotech company ImmunoGen (IMGN) for $10.1 billion Cerevel Therapeutics (CERE) for $8.7 billion. Both deals should enhance the already strong pipeline longer term. ABBV may be near the top of the near term range and at an excellent level to sell a call. HOLD

Alexandria Real Estate Equities, Inc. (ARE)
Yield: 4.0%
ARE has soared over 40% since the low of late October. But we didn’t miss the boat. The stock is still more than 40% below the all-time high. The company also has a highly reliable and growing business that should thrive in any economy. It’s cheap with strong momentum ahead of a period of likely strong performance as interest rates abate. It has leveled off in the past month or so but could have another leg higher before long. BUY

Digital Realty Trust (DLR)
Yield: 3.7%
This data center REIT leveled off and has been bouncing around since the beginning of December. It’s a good sign for the stock that it hasn’t had a pullback of any significance after a big surge. DLR had a strong week last week, but it may be a little toppy in the short term. It looks like REIT should continue to recover from their abysmal two-year performance now that interest rates have likely peaked and are coming down. Digital also has the additional catalyst of increasing AI spending and is getting a boost from the AI craze. DLR tends to pull back after a surge higher and the calls were sold when it hit a new high. HOLD

Intel Corp, (INTC)
Yield: 1.1%
INTC soared over 50% between late October and the end of the year and finished 2023 with a spectacular 93% return. Earnings indicate that Intel’s turnaround is well on track. It has promising new chips coming out in high growth areas and its foundry business could be huge. The stock got dirt cheap, and investors are increasingly willing to bet on the company’s future. I expect this to be another strong year for Intel as the turnaround to profitability comes to fruition. But after this recent huge surge it may take a breather or pull back as it may have already started to do. BUY

Marathon Petroleum Corp, (MPC)
Yield: 2.1%
This newly added oil refiner stock sort of bounces around with the energy sector, except better. When energy stocks get hot, MPC gets hotter. When the energy sector is sucking wind, MPC still does good. Even though the energy sector posted a negative return for 2023, MPC returned a solid 30% for the year. While the environment can vary from quarter to quarter, it should remain an overall profitable environment for refiners over the next several years. MPC also has the advantage of spiking higher if there is more trouble in the Middle East. BUY

NextEra Energy, Inc. (NEE)
Yield: 3.1%
After a rotten couple of years, NEE has been trending sharply higher since early October. It’s up over 30% from the 52-week low and it looks like we have seen the bottom if this cycle. The clean energy utility delivered solid earnings and management reiterated previous growth projections and said the company expects to deliver earnings near the top of the expected range through 2026. This stock is still very oversold. It had been a market superstar that investors loved because it offered both defense and growth. It will rise again. BUY

Realty Income Corp. (O)
Yield: 5.2%
After a terrible 2023, REITs have come alive again and O is doing even better. Since the market rallied on peak interest rates and the end of October, the sector benchmark Vanguard Real Estate Index Fund (VNQ) is up 22% and is up more than 27% over the same period. Receding inflation and interest rates remove the main downside catalyst that has been in place for the past two years. And its retail staple properties, and new data center acquisitions, should produce reliable revenue in just about any economy. BUY

Qualcomm Corp. (QCOM)
Yield: 2.3%
The mobile device chip maker has a bad time of it from the beginning of 2022 until the end of last year. But it has come alive again lately. Although returns lagged that of the overall technology sector in 2023, it still returned over 38% for the year, and 33% of that return came in November and December. This is a company that will benefit from the AI revolution later than the 2023 movers and shakers. But the revolution will come to mobile devices. Qualcomm is introducing new AI chips for PCs and smartphones that could be big sellers next year. When QCOM moves it can make up for lost time. BUY

The Williams Companies, Inc. (WMB)
Yield: 5.1%
Returns have been solid and just what you hope for in a high dividend stock in a challenging market environment. The natural gas pipeline company has been very bouncy in an upward trend that began more than six months ago. 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 (with 2.38 times cash flow coverage). Recent acquisitions and expansions ensure more solid growth going forward all the way out to 2028. BUY

Xcel Energy Inc. (XEL)
Yield: 3.3%
Utilities are still remarkably reliable revenue generators in any economy. Alternative energy is still the wave of the future. A combination of safety and growth is still highly desirable. The last two crummy years are not what this stock is about. XEL has been trending higher since the beginning of last month and it’s had a convincing 18% move off the low. This is one of the best utility stocks to own and the recent debauchery may prove to be very temporary. XEL still sells near the lowest levels of the past several years and now has positive momentum. BUY

Existing Call Trades

Sell DLR January 19 $135 calls at $6.00 or better
The data center REIT had a spike last week and is now more the $2 per share above the strike price with just four days to go before options expiration. This might be a close one. We’ll see what happens with the market and this stock this week. But we locked in a high income and will get a strong total return if the stock is called.

Sell INTC January 19 $42.50 calls at $3.50 or better
INTC is more than $4 per share above the strike price with less than a week until the expiration date. Unless things get ugly for the tech sector this week, it looks like INTC will be called. We still have QCOM if tech continues to rally. It’s still not a bad time to sell the calls after the stock had a huge surge. If it gets called, we still got a great income and can buy the stock again on weakness later in the year.

Sell ABBV March 15 $160 calls at $7.00 or better
ABBV touched the 52-week high last week when these calls hit the target price. As I mentioned above, the company probably is still not out of the woods with the Humira patent expiration as more companies will launch biosimilars in 2024. It was a good price level to sell a call and boost income.


Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
Qualcomm Inc. QCOM5/5/21$134.65$140.20$130.002.28%10.65%
Intel CorporationINTC 7/27/22$40.18$47.12$35.001.06%22.86%
The Williams Companies WMB8/24/22$35.58$34.92$38.005.13%6.53%
NextEra Energy, Inc.NEE4/25/23$77.50$61.04$65.003.06%-19.87%
Realty Income Corp. O6/27/23$60.19$58.90$62.005.23%1.11%
Digital Realty TrustDLR7/18/23$117.31$137.08$125.003.56%19.05%
AbbVie Inc.ABBV7/25/23$141.63$162.40$150.003.82%16.91%
Xcel Energy Inc.XEL8/22/23$57.95$61.31$65.003.39%7.64%
Marathon Petroleum Corp.MPC10/24/23$149.45$157.46$155.002.10%6.52%
Alexandria Real Estate Eq.ARE12/19/23$129.54$126.25$140.004.02%-1.58%
Open RecommendationsTicker SymbolInitial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
DLR Jan 19th $135 callDLR240119C00130000Sell 11/22/23$6.00$3.50$6.005.11%
INTC Jan 19th $42.50 callINTC240119C00042500Sell11/29/23$3.50$4.63$3.508.71%
ABBV Mar 15th $160 callABBV240315C00165000Sell1/10/24$7.00$7.40$7.004.94%
as of close on 01/12/2024
StockTicker Symbol ActionEntry DateEntry PriceSale DateSale PriceTotal Return
Innovative Industrial Props.IIPRCalled6/2/20$87.829/18/20$100.0015.08%
U.S. BancorpUSBCalled 7/22/20$36.269/18/20$383.42%
Brookfield Infras. Ptnrs.BIPCalled6/24/20$41.9210/16/20$458.49%
Starbucks Corp.SBUXCalled8/26/20$82.4110/16/20$886.18%
Visa CorporationVCalled 9/22/20$200.5611/20/20$2000.00%
AbbVie Inc.ABBVCalled6/2/20$91.0412/31/20$10012.43%
Enterprise Prod. Prtnrs.EPDCalled6/24/20$18.141/15/21$2015.16%
Altria GroupMOCalled 6/2/20$39.661/15/21$407.31%
U.S. BancorpUSBCalled 11/25/20$44.681/15/21$451.66%
B&G Foods Inc,BGSCalled10/28/20$26.792/19/21$284.42%
Valero Energy Inc.VLOCalled8/26/20$53.703/26/21$6011.73%
Chevron Corp.CVXCalled12/23/20$85.694/1/21$9612.95%
KKR & Co.KKRCalled3/24/21$47.986/18/21$5514.92%
Digital Realty TrustDLRCalled1/27/21$149.177/16/21$1555.50%
NextEra Energy, Inc.NEECalled2/24/21$73.769/17/21$8010.00%
Brookfield Infras. Ptnrs.BIPCalled1/13/21$50.6310/15/21$5511.65%
AGNC Investment CorpAGNCSold1/13/21$15.521/19/22$155.92%
ONEOK, Inc.OKECalled5/26/21$52.512/18/22$6019.62%
KKR & Co.KKRSold8/25/21$64.522/23/22$58-9.73%
Valero Energy Inc.VLOCalled11/17/21$73.452/25/22$8315.53%
U.S BancorpUSBSold3/24/21$53.474/13/22$51-1.59%
Enterprise Product Ptnrs EPDCalled3/17/21$23.214/14/22$2411.25%
FS KKR Capital Corp. FSKCalled10/27/21$22.014/14/22$2313.58%
Xcel Energy Inc. XELCalled10/12/21$63.005/20/22$7012.66%
Innovative Industrial Props.IIPRSold3/23/22$196.317/20/22$93-51.23%
One Liberty PropertiesOLPSold7/28/21$30.378/24/22$25-12.94%
ONEOK, Inc.OKECalled5/25/22$65.141/20/23$652.66%
Xcel Energy, Inc.XELCalled10/26/22$62.571/20/23$654.67%
Realty Income Corp. OCalled9/28/22$60.372/17/23$635.41%
Medical Properties TrustMPWSold1/24/23$13.223/21/23$8-38.00%
Brookfield Infrastructure Cp.BIPCCalled11/9/22$42.437/21/23$458.72%
Star Bulk Carriers Corp.SBLKSold6/1/22$33.308/8/23$18-31.38%
Visa Inc.VCalled12/22/21$217.168/18/23$2359.16%
Global Ship Lease, Inc.GSLSold2/23/22$24.968/29/23$19-13.82%
ONEOK, Inc.OKECalled3/28/23$60.989/15/23$659.72%
Hess CorporationHESCalled6/6/23$132.2510/20/23$15517.87%
Tractor Supply CompanyTSCOSold9/26/23$203.0311/28/23$200-1.02%
SecurityIn/out moneySell DateSell PriceExp. Date$ returnTotal % Return
IIPR Jul 17 $95 callout-of money6/3/20$3.007/17/20$3.003.40%
MO Jul 31 $42 callout-of-money6/17/20$1.607/31/20$1.604.03%
ABBV Sep 18 $100 callout-of-money7/15/20$4.609/18/20$4.605.05%
IIPR Sep 18 $100 callin-the-money7/22/20$5.009/18/20$5.005.69%
QCOM Sep 18 $95 callin-the-money6/24/20$4.309/18/20$4.304.82%
USB Sep 18 $37.50 callin-the-money7/22/20$2.009/18/20$2.005.52%
BIP Oct 16 $45 callin-the-money9/2/20$1.9510/16/20$1.954.65%
SBUX Oct 16 $87.50 callin-the-money10/16/20$3.3010/16/20$3.304.00%
V Nov 20 $200 callin-the-money9/22/20$10.0011/20/20$10.004.99%
ABBV Dec 31 $100 callin-the-money11/18/20$3.3012/31/20$3.303.62%
EPD Jan 15 $20 callin-the-money11/23/20$0.801/15/21$0.804.41%
MO Jan 15 $40 callin-the-money11/25/20$1.901/15/21$1.904.79%
USB Jan 15 $45 callin-the-money11/25/20$2.001/15/21$2.004.48%
BGS Feb 19 $27.50 callin-the-money12/11/20$2.402/19/21$2.408.96%
VLO Mar 26 $60 callin-the-money2/10/21$6.503/26/21$6.5012.10%
CVX Apr 1 $95.50 callin-the-money2/19/21$4.304/1/21$4.305.02%
AGNC Jun 18 $17 callout-of-money4/13/21$0.506/18/21$0.503.21%
KKR Jun 18 $55 callin-the-money4/28/21$3.006/18/21$3.006.25%
USB Jun 16 $57.50 callout-of-money4/28/21$2.806/18/21$2.805.24%
DLR Jul 16 $155 callin-the-money6/16/21$8.007/16/21$8.005.36%
AGNC Aug 20 $17 callout-of-money6/23/21$0.508/20/21$0.503.00%
OKE Aug 20 $57.50 callout-of-money6/23/21$3.508/20/21$3.506.67%
NEE Sep 17 $80 callin-the-money8/11/21$3.509/17/21$3.504.75%
BIP Oct 15 $55 callin-the-money9/1/21$2.0010/15/21$2.003.95%
USB Nov 19 $60 callout-of-money9/24/21$2.3011/19/21$2.304.30%
OKE Nov 26 $65 callout-of-money10/20/21$2.2511/26/21$2.254.28%
KKR Dec 17 $75 callout-of-money10/26/21$3.5012/17/21$3.505.42%
QCOM Jan 21 $185 Callout-of-money11/30/21$9.651/21/22$9.657.17%
OLP Feb 18 $35 Callout-of-money11/19/21$1.502/18/22$1.504.94%
OKE Feb 18 $60 Callin-the-money1/5/22$2.752/18/22$2.755.24%
USB Feb 25 $61 callout-of-money1/13/22$2.502/25/22$2.504.68%
VLO Feb 25 $83 callin-the-money1/18/22$4.202/25/22$4.206.13%
EPD Apr 14th $24 callin-the-money3/2/22$1.254/14/22$1.255.69%
FSK Apr 14th $22.50 callin-the-money3/10/22$0.904/14/22$0.904.09%
XEL May 20th $70 callin-the-money3/30/22$3.005/20/22$3.004.76%
SBLK July 15th $134 callout-of-money6/1/22$1.607/15/22$1.604.80%
OKE Oct 21st $65 callout-of-money8/24/22$3.4010/21/22$3.405.22%
OKE Jan 20th $65 callIn-the-money11/25/22$3.701/20/23$3.705.68%
XEL Jan 20th $65 callin-the-money11/25/22$5.001/20/23$5.007.99%
O Feb 17th $62.50 callin-the-money12/28/22$3.002/17/23$3.004.97%
QCOM Sep 16th $145 callout-of-money7/20/22$11.759/16/22$11.758.73%
V Mar 17th $220 callout-of-money1/24/23$12.003/17/23$12.005.51%
OKE May 19th $65 callout-of-money4/11/23$2.705/19/23$2.704.43%
V Jun 2 $230 callout-of-money4/21/23$10.506/2/23$10.504.82%
BIPC $45 July 21st callin-the-money5/23/23$3.257/21/23$3.257.66%
V $235 Aug 18th callin-the-money7/11/23$9.008/18/23$9.004.13%
GSL $20 Aug 18th callout-of-money7/11/23$1.258/18/23$1.255.00%
OKE $65 Sep 15 callin-the-money9/15/23$3.207/25/23$3.204.92%
INTC $35 Oct 20th callout-of-money9/8/23$3.7810/20/23$3.789.41%
HES $155 Oct 20th callin-the-money9/8/23$9.0010/20/23$9.006.81%