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Income Advisor
Conservative investing. Double-digit income.

March 5, 2024

The good times keep rolling. The S&P 500 continues to make new highs and closed last week up 7.7% YTD. Nine of the 11 S&P sectors are well into positive territory for the year so far.

As usual, the index is being led higher by technology, which is by far the largest sector. Technology stocks are up over 12% YTD. While no other stock sectors are up as much as the overall market, most of them are delivering very respectable returns for the year so far. The only down sectors are Real Estate and Utilities. But even these beleaguered sectors are only down 1.4% and 3.25% respectively YTD.

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The Rally Continues

The good times keep rolling. The S&P 500 continues to make new highs and closed last week up 7.7% YTD. Nine of the 11 S&P sectors are well into positive territory for the year so far.

As usual, the index is being led higher by technology, which is by far the largest sector. Technology stocks are up over 12% YTD. While no other stock sectors are up as much as the overall market, most of them are delivering very respectable returns for the year so far. The only down sectors are Real Estate and Utilities. But even these beleaguered sectors are only down 1.4% and 3.25% respectively YTD.

The market rally paused for about a week as recent inflation data came in higher than expected, thus reducing the expectations for lower interest rates. But stocks got a boost again after last week’s inflation numbers came in as expected. While artificial intelligence excitement and a recovery in the semiconductor industry are driving technology, the rally has been much broader lately.

This leg of the bull market rally may still have legs. But I still believe that the market is overestimating the likelihood and extent of lower interest rates later this year. Inflation is down but not out. Rates are unlikely to come down by any impactful degree unless the economy rolls over. That realization will at least end the current rally, at some point, before too long.

Meanwhile, the portfolio is well positioned with stocks that are reaping the bounty of the current environment along with other stocks that should benefit if the current rally sputters. And the income will keep rolling in, regardless of short-term market gyrations.

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”

Portfolio Recap

AbbVie Inc. (ABBV)
Yield: 3.5%
ABBV is coming off a tough 2023 as it had to deal with shrinking revenues and earnings as its mega-blockbuster drug Humira lost patent exclusivity in the U.S. But that has been long-expected and well-planned for. Investors are now looking toward the promising future beyond as management expects moderate earnings growth this year and robust growth next year. Management expects combined sales of just two immunology replacement drugs Skyrizi and Rinvoq will be $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: 4.1%
The life science property REIT had a mostly terrible last two calendar years as interest rates rose and the REIT sector took it on the chin. Alexandria also got lumped in with office REITs, which are suffering from the work-from-home trend with low occupancy rates. But the company provides lab space and related offices that aren’t affected. ARE surged far more than its peers in the last two months of last year as the interest rate trade reversed. But it has struggled through most of this year so far as interest rates moved up again amid the stronger economy. Things might be changing though. ARE has broken the recent downtrend and has moved up 12% in the last month. 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 9% 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. 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 as it is estimated the world needs to invest $1 trillion in digital infrastructure in the next decade. Despite recent stock performance, Brookfield continues to deliver strong results. Funds from operations grew 10% for 2023. 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 hydrocarbon 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. There is a good chance EPD delivers another solid year in 2024. (This security generates a K-1 form at tax time). BUY

Marathon Petroleum Corp. (MPC)
Yield: 1.9%
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: 3.7%
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: 2.0%
In the monthly issue last week, I mentioned that QCOM had satisfied the general criteria for selling a covered call. It was trading at a two-year high after a recent surge. But I held off because the stock still had strong momentum. It’s up 58% since late October and 17% YTD. Semiconductors and AI stocks have gotten hot, and the strength may last a while longer. 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 coming to an end. Qualcomm is also introducing new AI chips for PCs and smartphones that could be big sellers this year. It’s an AI beneficiary that is just now coming into the spotlight. 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 the Nixon administration. 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: 5.2%
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 been moving 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 kicking butt and taking names 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). Recent acquisitions and expansions ensure more solid growth going forward all the way out to 2028. BUY

Rating change – “BUY” to “HOLD”

Xcel Energy Inc. (XEL)
Yield: 4.4%
The alternative energy utility had a terrible week. The stock crashed 14% after it was reported last Wednesday 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. XEL has recovered modestly in Monday’s trading. But the stock is downgraded to a HOLD until there is more clarity on the matter. HOLD

Existing Call Trades

Sell ABBV March 15 $160 calls at $7.00 or better
The rally in ABBV has continued. The stock 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 ten days left until options expiration, ABBV is trading about 18 per share above the strike price. It is highly likely to be called.

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 10 per share above the strike price. However, energy and refiner stocks can be very volatile in the near term and there are more than three weeks before 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$178.91$150.003.47%28.80%
Alexandria Real Estate Eq.ARE12/19/23$129.54$124.27$140.004.09%-3.12%
American Tower Corp.AMT1/23/24$202.26$201.76$220.003.37%-0.25%
Brookfield Infrstr. Cp.BIPC2/27/24$32.64$33.81$40.004.79%2.09%
Enterprise Product Ptnrs.EPD2/27/24$27.61$27.75$30.007.23%0.51%
Marathon Petroleum Corp.MPC10/24/23$149.45$173.21$155.001.91%17.77%
NextEra Energy, Inc.NEE4/25/23$77.50$55.21$65.003.73%-26.85%
Qualcomm Inc. QCOM5/5/21$134.65$163.09$165.001.96%29.38%
Realty Income Corp.O6/27/23$60.19$52.24$62.005.89%-9.45%
The Williams Companies WMB8/24/22$35.58$36.40$38.005.22%11.04%
Xcel Energy Inc.XEL8/22/23$57.95$49.57$65.004.42%-12.97%
Call Trades
Open RecommendationsTicker SymbolIntial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
ABBV Mar 15th $160 callABBV240315C00165000Sell1/10/24$7.00$19.73$18.354.94%
MPC Mar 28th $165 callMPC240328C00165000Sell2/14/24$10.00$9.50$9.126.69%
as of close on 03/01/2024
xTicker Symbol ActionEntry DateEntry PriceSale DateSale PriceTotal Return
Innovative Industrial Props.IIPRCalled6/2/20$87.829/18/20$10015.08%
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-money7/20/22$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-money11/22/24$6.001/19/24$6.005.11%
INTC $42.50 Jan 19th callin-the-money11/29/24$3.501/19/24$3.508.71%

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