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Income Advisor
Conservative investing. Double-digit income.

March 19, 2024

It’s another big Fed week in a market that has rallied for more than four months.

The S&P 500 is up 7.28% in the first two and a half months of this year and has rallied over 25% since the low of late October. Stocks have been thriving amid the likely peak in interest rates, expected Fed rate cuts this year, a still-strong economy, and the artificial intelligence (AI) catalyst in the technology sector.

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The Rally Versus the Fed

It’s another big Fed week in a market that has rallied for more than four months.

The S&P 500 is up 7.28% in the first two and a half months of this year and has rallied over 25% since the low of late October. Stocks have been thriving amid the likely peak in interest rates, expected Fed rate cuts this year, a still-strong economy, and the artificial intelligence (AI) catalyst in the technology sector.

But enthusiasm has been waning recently as stubbornly sticky inflation threatens to keep interest rates high. The current consensus expectation is that the Fed will cut rates three times this year beginning around mid-year (presumably at 0.25% per cut). The Fed’s March meeting is this week. Investors will be focused on whether the Fed statement puts a damper on the current expectation of three cuts this year.

A Fed indication of less than three cuts would likely confirm recent investor negativity about the future of interest rates amid sticky inflation. It could possibly derail this rally. But I believe that is unlikely. The Fed will likely spew more ambiguous drivel as usual, and the market will probably be relieved over the lack of bad news.

The rest of the year could be viewed in either a positive or negative way. You could say that the market will either deal with continued high interest rates or a tanking economy, both of which could be bad for stocks. Or you could take the view that if interest rates remain high, it means the economy is strong. If the economy does turn south, falling interest rates will compensate the market. Either of those scenarios could be good for stocks.

Given the recent market behavior, I believe it is likely that the market will find a way to be positive. Of course, extremes in either direction are a negative risk. Inflation could accelerate and send rates even higher, or the economy could fall into a recession. While those things are certainly possibilities, the middle ground is more likely, at least for the foreseeable future.

Past Month Activity

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

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

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

March 15th
ABBV March 15th $160 calls at $7.00 – Expired
AbbVie Inc. (ABBV) stock – Called

Portfolio Recap

Alexandria Real Estate Equities, Inc. (ARE)
Yield: 4.1%
This one-of-a-kind life science property REIT has cooled off in March after its recent resurgence as interest rates are unlikely to come down as much as investors previously thought. If there is worse-than-expected news from the Fed meeting this week, it could put the kibosh on the rise of the more defensive interest rate-sensitive stocks. But it’s mostly just short-term noise. ARE is a great income stock selling at the low end of historical valuations in an environment where interest rates have likely peaked and will most likely trend lower over the course of this year. BUY

American Tower Corporation (AMT)
Yield: 3.3%
Ditto what I just said about ARE. It’s had the same recent successes and struggles in terms of stock prices. AMT has cooled off recently too for similar reasons. But AMT also can ride the good AI news and buck the trend in the REIT sector. 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. AMT will most certainly shine again. In the meantime, it pays you to wait. BUY

Brookfield Infrastructure Corp. (BIPC)
Yield: 4.8%
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. BUY

Enterprise Product Partners L.P. (EPD)
Yield: 7.0%
The midstream energy partnership just hit a new 52-week high. The energy sector has been riding high recently, and the midstream companies have been performing much better than most other income stocks. EPD is already up about 10% YTD. Looking forward, the company should deliver solid growth this year with anticipated steady hydrocarbons demand and recent 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 K1 form at tax time). BUY

Marathon Petroleum Corp, (MPC)
Yield: 1.7%
This superstar refiner is on fire and keeps hitting new all-time highs. The energy sector has gotten hot and is the top-performing market sector of the past month as demand for refined product remains strong and oil prices are rising. MPC is up 28% YTD and 16.5% in the first half of March alone. The stock tends to post good performance even when the energy sector struggles. But with the tailwind of a strong sector, the performance is huge. 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. We’ll see if the rally has more to go. BUY

NextEra Energy, Inc. (NEE)
Yield: 3.4%
NEE has been moving higher this month. It 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%
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. QCOM cooled off last week after a huge rally in which it had risen 22% YTD and 65% since late October. A breather would probably be a healthy thing for the stock. But the rest of the year looks strong as Qualcomm is also introducing new AI chips for PCs and smartphones that could be big sellers this year. BUY

Realty Income Corp. (O)
Yield: 5.9%
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: 5.1%
Energy stocks have gotten hot and WMB is up over the past months to within pennies of the 52-week high. Returns have been solid and just what you hope for in a high-dividend stock in a challenging market environment for such things. 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 and recent acquisitions and expansions ensure more solid growth going forward all the way out to 2028. BUY

Xcel Energy Inc. (XEL)
Yield: 4.2%
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. Xcel has admitted that its equipment was likely involved in igniting the blaze. 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. The stock has bounced higher since the initial decline and has held steady. HOLD

Existing Call Trades

ABBV March 15th $160 calls at $7.00 – Expired
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)

The calls were sold when ABBV was at the very top of the recent range, from which it had pulled back several times over the past year. But ABBV broke out of the range in which it has traded for the last two years as investors are apparently looking ahead to when earnings truly turn the corner next year and are pricing in a brighter future beyond the Humira patent expiration. But the stock provided a strong income and delivered a better than 20% return in just two-thirds of a year.

Sell MPC March 28th $165 calls at $10.00 or better

This refiner stock is running away as well. Demand for refined product is strong in the solid economy, and oil prices have been on the rise. MPC has consistently outperformed its peers. But the stock hit a new high in a still very uncertain economy. In the good refining environment, MPC really took off in March and is up 16.5% for the month so far and nearly 30 per share above the strike price. It is highly likely to be called in ten days but has provided a great income and total return in a short holding period for the stock.

Sell QCOM April 26th $170 calls at $10.00 or better

These calls hit the target price on the same day the update was released last Tuesday, but the stock pulled back sharply since. The calls are currently priced well below the strike price. But QCOM can move fast. If the tech sector has a good day or two you should be able to get the $10 call premium price or better if you haven’t already.

Sell WMB May 17th $35 calls at $2.00 or better

The calls have sold above the target price since they were targeted last week. In fact, if you sold these calls, you almost certainly got more than the targeted $2 per call. Energy stocks have been riding high, and the midstream companies are almost all near the 52-week highs. It’s a great time to cash in on the recent bounty and secure a high income and possible high total return.

Current Recommendations

Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
Alexandria Real Estate Eq.ARE12/19/23$129.54$123.75$140.004.11%-3.53%
American Tower Corp.AMT1/23/24$202.26$197.34$220.003.28%-2.53%
Brookfield Infrstr. Cp.BIPC2/27/24$32.64$33.89$40.004.78%2.33%
Enterprise Product Ptnrs.EPD2/27/24$27.61$28.64$30.007.00%3.73%
Marathon Petroleum Corp.MPC10/24/23$149.45$193.84$155.001.70%31.79%
NextEra Energy, Inc.NEE4/25/23$77.50$60.08$65.003.43%-20.40%
Qualcomm Inc. QCOM5/5/21$134.65$167.20$165.001.91%32.64%
Realty Income Corp.O6/27/23$60.19$52.19$62.005.91%-9.54%
The Williams Companies WMB8/24/22$35.58$37.00$38.005.14%14.36%
Xcel Energy Inc.XEL8/22/23$57.95$51.99$65.004.21%-7.76%
Call Trades
Open RecommendationsTicker SymbolIntial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
MPC Mar 28th $165 callMPC240328C00165000Sell2/14/24$10.00$18.85$9.126.69%
QCOM Apr 26th $170 callQCOM240426C00170000Sell 3/12/24$10.00$6.34$10.007.43%
WMB May 17th $35 callWMB240517C00035000Sell3/12/24$2.00$2.70$2.005.62%
as of close on 03/15/2024
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%
AbbVie Inc.ABBVCalled7/25/23$141.633/15/24$16015.11%
SecurityIn/out moneySell DateSell PriceExp. Date$ 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%
DLR $135 Jan 19th callin-the-money11/22/23$6.001/19/24$6.005.11%
INTC $42.50 Jan 19th callin-the-money11/29/23$3.501/19/24$3.508.71%
ABBV $160 Mar 15th callin-the-money1/10/24$7.003/15/24$7.004.94%

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