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Income Advisor
Conservative investing. Double-digit income.

July 18, 2023

These are confusing times in the market. It looks like a soft landing for the economy is more likely. But that’s no guarantee. We could still have a recession next year. The bull market could rage on or pull back. Instead of betting on the economic cycle, it’s a time to focus on individual stocks.

Artificial Intelligence (AI) exploded onto the market scene in a huge way in May when semiconductor company Nvidia (NVDA) blew away earnings expectations citing much higher demand for AI chips than anyone expected. It added another leg to the bull market as AI-related stocks soared.

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The Artificial Intelligence Revolution

These are confusing times in the market. It looks like a soft landing for the economy is more likely. But that’s no guarantee. We could still have a recession next year. The bull market could rage on or pull back. Instead of betting on the economic cycle, it’s a time to focus on individual stocks.

Artificial Intelligence (AI) exploded onto the market scene in a huge way in May when semiconductor company Nvidia (NVDA) blew away earnings expectations citing much higher demand for AI chips than anyone expected. It added another leg to the bull market as AI-related stocks soared.

Also, AI has been around and talked about for a while. The recent earnings announcement seemed to tip critical mass. It was already the next wave of growth in the technology revolution. But it is now officially here and affecting bottom lines. The gun sounded to start the race and the returns of companies that provide AI products and services should get a shot of adrenaline for years to come.

Growth estimates vary of course, but I haven’t seen any estimates of less than 20% annual growth for the AI market until 2030. Research firm Grand View Research estimates the AI market will grow by a staggering 37.3% per year from 2023 to 2030. Another study estimates that the AI industry value will grow by 13 times over the next seven years.

Companies cannot afford to fall behind in crucial emerging technologies regardless of the temporary state of the market or economy. The efficiencies and cost-saving benefits of AI are enormous. Developing AI services may be a matter of survival for many companies. The urgency should fuel furious demand for AI products and services.

Portfolio positions Intel (INTC) and Qualcomm (QCOM) benefit less directly and immediately from AI than companies that soared the most after the initial Nvidia boost. But both stocks got a sizable price gain. The AI frenzy will make both stocks better and the technology inevitably lifts profits in the years ahead. Both stocks are upgraded to a “BUY” rating this week. And there is a new portfolio addition highlighted below.

Past Month Activity

June 27th
Purchased Realty Income Corporation (O) - $60.19

July 11th
SOLD V August 18th $235 calls at $9.00
SOLD GSL August 18th $20 calls at $1.25

July 18th
Buy Digital Realty Trust, Inc. (DLR)
Intel Corp. (INTC) - Rating change “HOLD” to “BUY”
Qualcomm (QCOM) - Rating change “HOLD” to “BUY”

TRADE ALERT: Buy Digital Realty Trust, Inc. (DLR)

Digital Realty is a Real Estate Investment Trust (REIT) specializing in data center properties. It is the second largest data center REIT by market cap and the largest owner of data center space globally with 314 properties serving 5,000 customers in more than 50 metropolitan areas on five continents.

A data center is a specialized facility used to house computer systems and related components, servers and network equipment. It has sophisticated temperature control systems, integrated fire suppression. It also has redundant data communications connections and multiple backup power systems. Large data centers are industrial-scale operations that can use as much electricity as a small town.

The torrid pace of technological advancement and the staggering growth of the digital age has necessitated a new type of real estate property. The dependable operation of systems and information is crucial to the operational integrity of companies large and small. A computer outage can be a disastrous occurrence for a company that relies on smooth technological operation to deliver promised services.

If Amazon can’t fulfill orders, people can’t post on Meta or if ADP can’t process payrolls, there are disastrous consequences. You can’t just stuff computer systems and associated components in some basement anymore. The complexity of the equipment and the vitality of seamless operation require highly specialized facilities.

Of course, these properties aren’t that new anymore. DLR first traded on the market in 2004 and has experienced torrid growth ever since. It has been one of the best-performing REITs on the market. From the November 2004 IPO until the beginning of last year, DLR returned a whopping 2,865% with an average annual return of 21.85%. The returns over the period were more than five times the S&P 500 returns of 464%.

But since 2022 it has been a different story. DLR has returned -31% since the beginning of last year, greatly exceeding the overall market contraction of -5% over the same period. There are good reasons for the REIT’s underperformance.

The tech sector had an abysmal year in 2022 as inflation and rising interest rates cut into growth projections, although the sector is strong again this year as those things are abating. As a REIT, Digital must pay out the bulk of earnings in dividends. It must fund growth and acquisitions with either debt or share offerings. Higher interest rates increased the cost of borrowing, and the REIT was also forced to offer additional shares at a crummy price, thus diluting shareholdings.

The recent price decline has created a compelling valuation and a high yield of over 4%. Superstar stocks don’t often go on sale. When they do, it is usually for a good reason. But I believe Digital is capable of overcoming the current high debt levels and it operates in a subsector with incredibly powerful and compelling tailwinds. The low valuation combined with the strong growth potential and history of outperformance could provide the basis for powerful upside in the quarters ahead.

To counter the higher debt levels, the company has a plan to unload $2 billion worth of joint venture assets and use the money to pay down the debt. The debt reduction would reduce net debt/EBITDA to around 6 times, even lower than the 2018 level. It’s also worth noting that Digital has investment grade ratings on its debt from all the major credit rating agencies. The dividend is also well covered with a 73% payout ratio, which is low for a REIT.

There also seems to be a sense among investors that the party is over with the torrid data center growth. But it isn’t. The digital age is only just beginning and the need to house computers and related components continues to soar every year. Research firm Allied Market Research estimates that the data center market will grow from $187.4 billion in 2020 to over $500 billion in 2030.

A REIT with the size and scale of Digital is in an ideal position to benefit from this growth. With more properties and space than any other industry players, Digital can capitalize on the growing need for co-location services as cloud computing companies need to be connected to customers. It’s also true that Digital’s size gives it tremendous cost advantages. Digital gets significant discounts as one of the largest consumers of generators, air conditioning equipment, and electrical power.

But the growth projections above don’t include the burgeoning AI phenomenon. Businesses desperately scrambling to not fall behind in the game-changing technology will necessitate much more space and equipment that needs to be housed. According to one recent estimate, the global economy will need to invest $1 trillion over the next five years to upgrade data infrastructure.

Digital should benefit enormously and is already benefiting. Companies most likely to expand their AI capabilities are already tenants. Also, the technology often requires co-location with the company’s customers, which Digital is in a great position to provide. It should be easily doable for Digital to right the financial ship amid such overwhelming tailwinds.

Digital has consistent revenues backed by long-term contracts. It’s worth pointing out that DLR stock price barely budged in the pandemic crash of 2020. DLR will surely benefit as AI proliferates. The market also agrees. The stock got a nearly 30% boost since the Nvidia report.

Digital Realty Trust, Inc. (DLR)
Security type: Real Estate Investment Trust
Sector: Technology
Price: $118.28
52-week range: $85.76 - $138.09
Yield: 4.1%
Profile: Digital is the world’s second-largest data center REIT with 314 properties spanning five continents.


  • Data center demand is forecasted to quadruple this decade.
  • The AI craze will provide even more growth to the already rapidly expanding demand.
  • Despite the strong tailwinds, DLR sells 35% below the high.


  • The company has a high level of debt that has increased.
  • Rising interest rates have led to financial stumbles.

Portfolio Recap

Brookfield Infrastructure Corporation (BIPC)
Yield: 3.3%
The infrastructure company stock looks rock solid going forward. The company estimates earnings (as measured by funds from operations) will grow over 10% for 2023. Despite the market’s rise this year, BIPC still sells about 9% below the 52-week high, largely due to the lull in defensive stocks in the first half of the year. The market rally is broadening, and the economy is likely to slow in the second half, two things that should bode well for the relative performance of BIPC. HOLD

Global Ship Lease, Inc. (GSL)
Yield: 7.5%
After a tough year in 2022, GSL has returned a market-beating 25% YTD. The longer-term prognosis for the container shipping company stock has always been strong, as the industry supply/demand dynamic is very favorable. Results have been strong. Last quarter Global grew normalized earnings per share by 14.6% while continuing to expand its fleet of ships. Shipping rates are benefiting from the opening of the Chinese economy. GSL poked its head above 20 per share. Perhaps it can rally from there or maybe it pulls back in the near term, like it did the past two times. The portfolio sold a covered call to generate a high income when GSL was near a recent high. HOLD

Hess Corporation (HES)
Yield: 1.3%
The exploration and production company stock has been going sideways for two months but got a bump recently. Hess is sensitive to energy prices, although not as much as its peers because of its ability to increase production at low costs. Oil prices have risen recently on the stronger-than-expected economy. There are also OPEC and Saudi production cuts. We’ll see if energy prices rise to higher levels now or later in the quarters ahead. BUY

Rating change “HOLD” to “BUY”

Intel Corp, (INTC)
Yield: 1.5%
INTC got a huge 30% bump with confidence in its chip production ability and the indirect benefits from the soaring demand for AI-related products and services. We’ll see if Intel can slay the competition with its new plan and its new chips down the road. But a surge in technology demand across the board provided by the magnitude of the AI frenzy will lift all boats. Intel’s future got a lot better with the recent AI bump. It might increasingly be seen as a cheap stock with a brighter future. BUY

NextEra Energy, Inc. (NEE)
Yield: 2.6%
This combination regulated and clean energy utility stock has bounced around all over the place for the past two years and is currently at the low end of that range. NEE is still well below the recent high. Defensive stocks have floundered. But that might not last. This company is targeting earnings per share growth of 6% to 8% annually through 2026 and 10% per year dividend growth through at least 2024. BUY

Yield: 6.0%
After getting clobbered in May when the market hated its purchase of Magellan Midstream Partners (MMP), OKE has been coming right back and has regained nearly all those losses. It’s up 10% since the beginning of June. The deal will turn ONEOK from a natural gas operator to a diversified midstream company that services oil and refined products as well. The deal is a longer-term positive that could hurt performance in the near term. But this will remain a solid performer with a high and safe dividend and reliable earnings in an environment where overall market earnings are contracting. HOLD

Rating change – “BUY” to “HOLD”

Qualcomm Corp. (QCOM)
Yield: 2.6%
QCOM has leveled off since the big rise in late May and early June from the AI craze. Qualcomm has cutting-edge chips with AI capabilities and describes itself as the “on-device AI leader,” and the company should benefit mightily from the increasing shift towards AI and profits are now likely to soar sooner than previously expected. Although Qualcomm doesn’t benefit as directly and immediately from AI as some other companies, eventually the AI boost will find its way to mobile devices and QCOM will be in a great position. BUY

Realty Income Corp. (O)
Yield: 5.0%
This legendary monthly income stock is part of two underperforming sectors in the first half, real estate and consumer staples. It currently sells well below the pre-pandemic high, despite having higher earnings, and the stock is now near the lowest point since last summer. But income and safety may be at a premium in the second half of the year. Either investors will crave defense again or the rally will broaden out to include this year’s lagging sectors. BUY

Star Bulk Carriers Corp. (SBLK)
Yield: 7.7%
The dry bulk shipping company had rallied earlier this year as shipping rates recovered somewhat. But the stock has pulled back to about even YTD as the Chinese recovery hasn’t delivered the desired effect, at least not yet. Unlike GSL, Star Bulk hasn’t massively increased its fleet size, and year-over-year comparisons are tough as shipping rates have fallen. Although it is likely still the early innings of a multiyear positive cycle for shipping, the stock recently moved near the low. HOLD

Visa Inc. (V)
Yield: 0.8%
V loves the surprisingly strong economy and increasing soft-landing talk. Inflation is down, GDP was revised higher, and the consumer is still strong. In addition, Visa just purchased a Brazilian fintech company that rival MasterCard (MA) also wanted and beat them out. As a result, V soared to a new 52-week high and the highest price in about a year. The stock tends to level off after it surges higher, and the rally may have run out of gas. Therefore, the portfolio sold a call while the stock still has some momentum. HOLD

The Williams Companies, Inc. (WMB)
Yield: 5.4%
This midstream energy company has reliable earnings that should even remain solid in a slowing economy. Earnings per share grew a whopping 36% over last year’s quarter as natural gas volumes remained strong and growing. But growth is expected to slow as year-over-year comparisons include recent acquisitions. But the company is also investing heavily for future growth. Selling at just 8 times earnings, it is a cheap and defensive stock with a high and reliable dividend ahead of an uncertain second half of the year. BUY

Existing Call Trades

SOLD BIPC July 21st $45 calls at $3.25
BIPC is selling nearly 2 per share above the strike price and options expire on Friday. We’ll see what happens. If shares are not called, BIPC is a good, solid holding in an uncertain market going forward. If shares are called, we will take a profit while this market is riding higher. But either way, we guarantee a strong income return.

Sell V August 18th $235 calls at $9.00 or better
V has broken out to a new level and currently sells at 244 per share, 9 per share above the strike price. The performance of V over the next month will depend a lot on the overall market. If the rally continues or even stays afloat, V will likely be called away. But there can always be a pullback. We’ll see.

Sell GSL August 18th $20 calls at $1.25 or better
The stock has pulled back a little below the 20 per share level already. GSL has done this the previous two times it broke the 20 level. It may pull back further. But we took advantage of the near-term strength in the stock to get a great income while we wait for the longer-term positives to lift the stock.


Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
Qualcomm Inc. QCOM5/5/21$134.65$122.56$130.002.61%-4.55%
Visa Inc.V12/22/21$217.96$243.16NA0.74%12.86%
Global Ship Lease, Inc.GSL2/23/22$24.96$20.06NA7.48%-11.27%
Star Buld Carriers Corp.SBLK6/1/22$33.30$17.79NA7.72%-33.20%
Intel CorporationINTC7/27/22$40.18$33.15$35.001.51%-14.16%
The Williams Companies WMB8/24/22$35.58$33.38$38.005.36%-0.78%
Brookfield Infr.Cp.BIPC11/9/22$42.43$46.92$46.003.26%13.35%
ONEOK Inc.OKE3/28/23$60.98$63.73NA5.99%6.04%
NextEra Energy, Inc.NEE4/25/23$77.50$73.20$85.002.55%-5.34%
Hess CorporationHES6/6/23$132.25$135.26$140.001.29%2.61%
Realty Income Corp. O6/27/23$60.19$60.82$62.005.04%1.48%
Digital Realty TrustDLR7/18/23$118.28$125.004.13%
Existing Call Trades
Open RecommendationsTicker SymbolInitial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
BIPC $45 July 21st callBIPC230721C00045000Sell 5/23/23$3.25$1.25$3.257.66%
V $235 Aug 18th callV230818C00235000Sell 7/11/23$9.00$11.85$9.004.13%
GSL $20 Aug 18th callGSL230818C00020000Sell 7/11/23$1.25$0.90$1.255.00%
as of close on 7/14/2023
SecurityTicker 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$23.214/14.2022$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//2023$654.67%
Realty Income Corp. OCalled9/28/22$60.372/17/23$635.41%
Medical Properties TrustMPWSold1/24/23$13.223/21/23$8-38.00%
SecurityIn/out moneySell DateSell PriceExp. Date$ 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$11.759/16/2211.758.73%
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$10.506/2/2310.54.82%