Please ensure Javascript is enabled for purposes of website accessibility
Income Advisor
Conservative investing. Double-digit income.

January 9, 2024

The new year started with a whimper. Last week’s 1.5% down move ended a streak of nine consecutive up weeks for the S&P 500, the longest streak since 2004.

The streak had to end eventually. And a pullback after a 15% move higher is normal. Bull markets tend to have several 3% and 5% down moves. There may be more downside in the weeks ahead. But we are still in a market that is trending higher.

Download PDF

Slow Start, No Problem

The new year started with a whimper. Last week’s 1.5% down move ended a streak of nine consecutive up weeks for the S&P 500, the longest streak since 2004.

The streak had to end eventually. And a pullback after a 15% move higher is normal. Bull markets tend to have several 3% and 5% down moves. There may be more downside in the weeks ahead. But we are still in a market that is trending higher.

Inflation is down. Interest rates have peaked and may continue to fall. And there’s no recession in sight. As long as those things remain in place, stocks should have an upward bias. But in the near term there is always headline risk.

This should still be a good year for the defensive stocks that have struggled over the last two years because of rising interest rates. NextEra Energy (NEE), Realty Income (O), Xcel Energy (XEL), and Alexandria Real Estate Equity (ARE) are all still valued near the low end of the historical range and now have positive momentum.

It should also be another good year for technology stocks Intel (INTC) and Qualcomm (QCOM). Artificial intelligence spending continues to add another powerful growth catalyst that should last several years.

It’s also a good time to sell a covered call on certain stocks trading near the high that may have gotten a little ahead of themselves in the near term. In this update, I highlight a call to sell against portfolio position AbbVie Inc. (ABBV). The stock has moved up near the 52-week high. The last two times it has risen to this level, it has pulled back. It’s a great opportunity to generate a high income.

Past Month Activity

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

January 9
Sell ABBV March 15 $160 calls at $7.00 or better


Sell ABBV March 15 $160 calls at $7.00 or better
Expiration date: March 15
Strike price: $160
Call price: $7.00

AbbVie Inc. (ABBV)

The company is not expected to return to positive earnings growth until next year. Although the pipeline is great and capable of replacing lost Humira revenues, shrinking revenues will dog the company for several more quarters. ABBV has moved up more than 17% since late November and is currently near the 52-week high. The last two times ABBV hit this level it pulled back. Let’s generate some high income while we wait for the stock to move beyond the Humira patent expiration.

Here are the three scenarios.

1. The stock closes above the $160 strike price at expiration.
Call premium: $7.00
Dividends: $3.03
Appreciation: $18.37 ($160 strike price minus $141.63 purchase price)
Total: $28.40 (total return will be 20% in 8 months)

2. The stock price closes below but near our $160 strike price.
Call premium: $7.00
Dividends: $3.03
Total: $10.03 (total income of 7.0% in 8 months)

3. The stock price declines.
There will be $10.03 in income to offset the decline. Plus, the original purchase price was more than $18 per share below the strike price.

Portfolio Recap

AbbVie Inc. (ABBV)
Yield: 3.8%
ABBV finished 2023 about even with a total return of -0.45%. But it was a challenging year with Humira losing patent protection in the U.S. Things should improve from here. In fact, ABBV has moved 17% higher since late November and is near the 52-week high. 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 tends to pull back after it gets near the 52-week high. That’s why this should be a good time to sell a covered 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 and interest rates abating. It has leveled off in the past couple of weeks but should have another leg higher before long. BUY

Digital Realty Trust (DLR)
Yield: 3.7%
This data center REIT has pulled back from the recent high. Even though REITs had a terrible 2023, DLR returned 39% for the year. It looks like REITs have bottomed out and are on their way higher as interest rates have likely peaked and have been falling. 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%
This previously beleaguered and left for dead chipmaker stock has been reborn. INTC soared more than 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: 2.2%
This newly added oil refiner caught fire last week as oil price moved higher and it crossed the 160 per share mark. It has since pulled back with oil stocks. But the stock is always bouncy like this. In a hot energy market it does great. In an OK energy market it 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. 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. BUY

Realty Income Corp. (O)
Yield: 5.3%
This legendary income stock has been beaten down in the rising interest rate environment. But it seems to have really come back to life again after interest rates peaked. O has made a serious 30% move up from the October low and is still priced well below the pre-pandemic high. It now has positive momentum and room to run. BUY

Qualcomm Corp. (QCOM)
Yield: 2.3%
The 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 it will come to mobile devices. Qualcomm is introducing new AI chips for PCs and smartphones that could be big sellers next year. BUY

The Williams Companies, Inc. (WMB)
Yield: 5.0%
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: 3.4%
This clean energy utility stock has been trending slowly higher since the beginning of October. The low is already in for this cycle as XEL made a convincing move off the low. This is one of the best utility stocks to own and the recent debauchery will prove to be very temporary. XEL still sells near the lowest levels of the past several years and now has positive momentum. Prior to the rising interest rate environment over the last two years, XEL had delivered market-beating performance. BUY

Existing Call Trades

Sell DLR January 19 $135 calls at $6.00 or better
With a couple of weeks to go before options expiration, DLR is selling more that $4 per share below the strike price. The stock is consolidating since hitting the high in late October. We’ll see what happens with the market and this stock in the next couple of weeks. 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 had another surge higher after the calls were sold. The company announced a new PC chip that could ignite a new upgrade cycle. But the stock had an incredible year and an enormous 50% surge at the end. It would be normal for the stock to take a breather and pull back. The pullback last week may be the start.

Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
Qualcomm Inc. QCOM5/5/21$134.65$136.73$130.002.34%7.91%
Intel CorporationINTC7/27/22$40.18$46.89$35.001.07%22.26%
The Williams Companies WMB8/24/22$35.58$35.55$38.005.04%8.45%
NextEra Energy, Inc.NEE4/25/23$77.50$62.08$65.003.01%-18.51%
Realty Income Corp. O6/27/23$60.19$57.92$62.005.31%-0.57%
Digital Realty TrustDLR7/18/23$117.31$130.83$125.003.73%13.62%
AbbVie Inc.ABBV7/25/23$141.63$162.14$150.003.82%15.62%
Xcel Energy Inc.XEL8/22/23$57.95$63.73$65.003.26%11.89%
Marathon Petroleum Corp.MPC10/24/23$149.45$152.50$155.002.16%3.17%
Alexandria Real Estate Eq.ARE12/19/23$129.54$126.51$140.004.02%-1.38%
Open RecommendationsTicker SymbolInitial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
DLR Jan 19th $135 callDLR240119C00130000Sell 11/22/23$6.00$0.87$6.005.11%
INTC Jan 19th $42.50 callINTC240119C00042500Sell11/29/23$3.50$4.54$3.508.71%
as of close on 01/05/2024
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-money9/01/21$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%