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

March 12, 2024

Earnings season is over, and the market’s main focus is on the February inflation numbers that come out this week.

Stocks were able to continue to build on last year’s late rally in January and February. Mixed Fed and interest rate news was overcome by strong earnings, particularly in technology. Signs that artificial intelligence is continuing to drive strong demand and sales lifted the sector and the market.

Download PDF

It’s All About Inflation for Now

Earnings season is over, and the market’s main focus is on the February inflation numbers that come out this week.

Stocks were able to continue to build on last year’s late rally in January and February. Mixed Fed and interest rate news was overcome by strong earnings, particularly in technology. Signs that artificial intelligence is continuing to drive strong demand and sales lifted the sector and the market.

But that earnings catalyst is over. And the market will have to deal with this week’s February CPI number flatfooted. A better-than-expected number could rally stocks on the expectation of more rate cuts and sooner. A worse number would have the opposite effect. If the number comes in as expected, there might be a slight relief rally.

The Fed Chairman indicated last week that there would likely be rate cuts this year. But that could just mean a 0.25% cut or two at the very end of the year, or perhaps something juicier. The inflation report will drive investors’ near-term expectations about this year’s Fed cuts and the overall direction of interest rates. I still don’t expect much in the way of rate cuts this year unless the economy rolls over, and it is likely investors will be disappointed.

We’ll see what happens with inflation. The rally might also be long in the tooth. The S&P has rallied over 7% YTD and 25% since the end of October. A breather would be quite normal and expected.

In this update, I highlight two new covered calls in stock positions that have run higher recently. With stocks near the highs and the rally looking wobbly here, it’s a good time to lock in a high income and possible high total return.

Past Month Activity

February 14
Sold MPC March 28 $165 calls at $10.00

February 27
Purchased Enterprise Product Partners L.P. (EPD) - $27.61
Purchased Brookfield Infrastructure Corporation (BIPC) - $22.64

March 5
Xcel Energy Inc. (XEL) - Rating change “BUY” to “HOLD”

March 12
Sell QCOM April 26 $170 calls at $10.00 or better
Sell WMB May 17 $35 calls at $2.00 or better

TRADE ALERT: Sell QCOM April 26 $170 calls at $10.00 or better

Expiration date: April 26
Strike price: $170
Call price: $10.00

Qualcomm Inc. (QCOM)

The mobile device chip maker has had a great run. It’s up over 22% YTD and 65% since late October. I do believe the stock price will be higher at the end of the year and likely sooner. However, the technology sector has had a very strong start to the year. Earnings season provided a catalyst that has ended for now and many tech stocks have been pulling back. The call is sold while QCOM is near the recent high while the sector seems to be consolidating in the near term. It’s a good time to grab a high income with a high-priced call.

Here are the three scenarios.

1. The stock closes above the $170 strike price at expiration.
Call premium: $10.00
Dividends: $9.72
Appreciation: $35.35 ($170 strike price minus $134.65 purchase price)
Total: $55.07 (total return will be 40.9% in 3 years, and 49.6% if you sold the previous call for $11.75)

2. The stock price closes below but near our $170 strike price.
Call premium: $10.00
Dividends: $9.72
Total: $19.72 (total income of 14.6% in 3 years, and 23.4% if you sold the earlier call)

3. The stock price declines.
There will be $19.72 in income to offset the decline. Plus, the original purchase price was more than $35 per share below the strike price.

TRADE ALERT: Sell WMB May 17 $35 calls at $2.00 or better

Expiration date: May 17
Strike price: $35
Call price: $2.00

The Williams Companies, Inc. (WMB)

WMB has been bouncing around in a mostly sideways direction since the fall. It is at the high end of the recent range while the overall market rally may be long in the tooth. I do like midstream energy companies, and the portfolio now has Enterprise Product Partners (EPD) for exposure to the sector if WMB gets called. We can get a good income return out of a stock that hasn’t done much will well-timed calls.

Here are the three scenarios.

1. The stock closes above the $35 strike price at expiration.
Call premium: $2.00
Dividends: $3.60
Appreciation: -$0.58 ($35.58 purchase price minus $35.00 strike price)
Total: $5.02 (total return will be 14.1% in 20 months)

2. The stock price closes below but near our $35 strike price.
Call premium: $2.00
Dividends: $3.60
Total: $5.60 (total income of 15.7% in 30 months)

3. The stock price declines.
There will be $5.60 in income to offset the decline.

Portfolio Recap

AbbVie Inc. (ABBV)
Yield: 3.5%

After a subpar year in 2023 when the company suffered steeply falling revenues because of the Humira patent expiration, ABBV is up 13% YTD and 29% since late November. Investors are now looking toward the promising future beyond as management expects moderate earnings growth this year and robust growth next year. Immunology replacement drugs Skyrizi and Rinvoq are expected to generate $16 billion this year (Humira peak sales were $21 billion) and $27 billion in 2027. ABBV has broken out of the old range to a new all-time high as investors are starting to price in the company turning the corner on the way to a bright future. HOLD

Alexandria Real Estate Equities, Inc. (ARE)
Yield: 4.0%

I like what I’m seeing from ARE. The life science property REIT was getting hammered in the early part of the year after a big surge at the end of last year as the interest rate trade reversed. But it has been sharply on the rise again over the past month (over 13%) and reversed the recent downtrend. Although the REIT has very steady and predictable revenues, ARE has been more volatile than its peers. It sold off worse over the past two years because it was lumped in with office REITs. But it comes back with a vengeance when REITs come back into favor and investors realize it is one of the very best that’s selling at a cheap price. BUY

American Tower Corporation (AMT)
Yield: 3.4%

Ditto what I just said about ARE. It’s had the same recent successes and struggles in terms of stock price but has been on the upswing again recently. AMT has surged 10% since the end of February. This is one of the best REITs on the market that deals in very high-quality properties. The cell tower properties will only grow in demand in the years ahead, and in any other interest rate environment AMT will sell at a much higher price. ARE will most certainly shine again. In the meantime, it pays you to wait. 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 BIP wasn’t spared. But it is unlikely that rates will continue to move higher. Meanwhile, BIP has some of the most defensive revenues possible. It’s also been expanding into cell towers, data centers and foundries. BIPC had a strong rally at the end of last year but, unlike most of its conservative dividend-paying peers, it didn’t sell off this year. It just kind of went sideways. Meanwhile, Brookfield continues to deliver strong results. This stock had blown away S&P returns for every measurable period prior to the past two years. It will rise again. BUY

Enterprise Product Partners L.P. (EPD)
Yield: 7.2%

The midstream energy partnership is within pennies of the 52-week high after a solid earnings report. The company should deliver solid growth this year with anticipated steady hydrocarbons demand and $3.5 billion in recent growth acquisitions coming online. EPD has produced solid and steady returns in different market environments with a 17.45% return in 2023 after a strong bear market return of 15% for 2022. 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 K-1 form at tax time). BUY

Marathon Petroleum Corp, (MPC)
Yield: 1.8%

This superstar refiner is within one dollar of the all-time high hit last week. The economy is stronger than expected and this refiner stock is shining. Despite a decline from last year’s record revenues, earnings and revenues remain very strong by historical standards. The company is flush with cash from the boom times while robust profits continue to roll in. This stock has consistently outperformed its peers and has been solid even in environments when the overall energy sector struggled. The stock should continue to thrive unless the economy turns south. BUY

NextEra Energy, Inc. (NEE)
Yield: 3.6%

NEE 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. This stock is still oversold. It should have its day in the sun again, and probably before long. BUY

Qualcomm Corp. (QCOM)
Yield: 1.9%

After a terrible year in 2022 and underperformance in most of 2023, QCOM is back. It’s up over 22% YTD and 65% since late October. The recent outperformance of the technology sector is largely because of the recovery in the semiconductor sector. Qualcomm is also introducing new AI chips for PCs and smartphones that could be big sellers this year. 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. BUY

Realty Income Corp. (O)
Yield: 5.8%

This beleaguered stock 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. It is still a great stock at a cheap price with retail staple properties and solid growth likely ahead. BUY

The Williams Companies, Inc. (WMB)
Yield: 5.3%

The year started awfully for dividend stocks and the energy sector. That’s an ugly backdrop for WMB. It fell near the lowest level since last fall. But the defensive and high-end midstream energy stock has moved higher again of late as earnings beat expectations and the company raised guidance for 2024. While the market environment temporarily turned against WMB, it is still thriving operationally and the stock price recently recovered to near the 52-week high. It pays a well-supported dividend with 2.38 times cash flow coverage. But WMB is near the high end of the recent range. Given the late stage of the current market rally, it makes sense to sell a call here and generate a high income from the recent move higher. BUY

Xcel Energy Inc. (XEL)
Yield: 4.3%

The alternative energy utility had a terrible week earlier in the 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. It is an ongoing story, and 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. Xcel denies its power lines started the fire and the stock has recovered over the last week. But it will remain rated HOLD for now. HOLD

Existing Call Trades

Sell ABBV March 15 $160 calls at $7.00 or better
ABBV has broken out of the range in which it has traded for the last two years. It could be that investors are looking ahead to when earnings truly turn the corner next year and will continue to run higher. But it could also pull back and consolidate if investors sense they might be a little early to the party. With just three days left until options expiration, ABBV is trading about 18 per share above the strike price. It is almost certain to be called. We still got a great income and higher return from the stock.

Sell MPC March 28 $165 calls at $10.00 or better
The good times are rolling for MPC as well. The refiner stock recently made a new high and is currently trading more than 14 per share above the strike price. However, energy and refiner stocks can be very volatile in the near term and there are more than two weeks until options expiration. It could be a completely different story by then. Meanwhile, we secured a high income and possible strong total return.

Current Recommendations

Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
AbbVie Inc.ABBV7/25/23$141.63$178.85$150.003.47%28.76%
Alexandria Real Estate Eq.ARE12/19/23$129.54$127.17$140.003.99%-0.86%
American Tower Corp.AMT1/23/24$202.26$207.31$220.003.28%-2.50%
Brookfield Infrstr. Cp.BIPC2/27/24$32.64$35.26$40.004.59%6.46%
Enterprise Product Ptnrs.EPD2/27/24$27.61$28.00$30.007.16%1.41%
Marathon Petroleum Corp.MPC10/24/23$149.45$179.55$155.001.84%22.08%
NextEra Energy, Inc.NEE4/25/23$77.50$57.81$65.003.56%-23.40%
Qualcomm Inc. QCOM5/5/21$134.65$170.57$165.001.88%35.31%
Realty Income Corp.O6/27/23$60.19$52.91$62.005.82%-8.29%
The Williams Companies WMB8/24/22$35.58$36.05$38.005.27%11.43%
Xcel Energy Inc.XEL8/22/23$57.95$51.06$65.004.29%-10.43%

Call Trades

Open RecommendationsTicker SymbolInitial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
ABBV Mar 15th $160 callABBV240315C00165000Sell1/10/24$7.00$19.87$18.354.94%
MPC Mar 28th $165 callMPC240328C00165000Sell2/14/24$10.00$15.36$9.126.69%
QCOM Apr 26th $170 callQCOM240426C00170000Sell Pending$9.20$10.007.43%
WMB May 17th $35 callWMB240517C00035000Sell Pending$1.95$2.005.62%
as of close on 03/08/2024


XTicker 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%
Digital Realty TrustDLRCalled7/18/23$117.311/19/24$13517.16%
Intel CorporationINTCCalled7/27/22$40.181/19/24$439.76%
SecurityIn/out moneySell DateSell PriceExp. Date$ 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-money7/20.2022$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%
DLR $135 Jan 19th callin-the-money11/22/24$6.001/19/24$6.005.11%
INTC $42.50 Jan 19th callin-the-money11/29/24$3.501/19/24$3.508.71%

Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.