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Income Advisor
Conservative investing. Double-digit income.

April 7, 2021

Yesterday’s market drivers are taking a back seat while previously jilted and ignored stocks are taking the baton.

The Bull Keeps on Charging
Yesterday’s market drivers are taking a back seat while previously jilted and ignored stocks are taking the baton.

Technology stocks, the deliverers of bull markets and quick recoveries in every measurable period over the last 10 years, are still wallowing below the highs of one month ago. The white-hot energy sector has cooled off too. And that sector is still floundering well below the dizzying heights of a month ago.

Yet, even with those market drivers on the sidelines, the S&P 500 continues to forge ever higher, almost without so much as a hiccup. The index continues to make more new all-time highs on a regular basis. Looking at the index chart, you wouldn’t know that anything changed under the hood. The march to the heavens continues without disruption.

What’s driving the market higher?

The cyclical, or “open-up” stocks, are still out of the closet and partying like there’s no tomorrow. Other cyclical sectors didn’t get as overextended as energy and are still on the move. Financials, consumer discretionary, materials and industrials are sectors that continue to rally.

As well, defensive stocks are busting a move. The top-performing S&P 500 sector over the past month is real estate, with utilities not far behind. These stocks had been left for dead in the earlier days of the cyclical rally. It’s a team effort now. While the studs are on the sideline, the rest of the team gets the job done.

Most of the current portfolio positions were added at advantageous prices over the past few months while being ignored by the cyclical rally. But now they’re coming alive and moving higher. I believe most will continue to move up in the weeks ahead.

The portfolio is currently in an unusual position of having no outstanding covered calls. Energy positions with covered calls in Valero Energy (VLO) and Chevron (CVX) had a huge move and were called away when the options expired. While those positions and calls delivered smashing total returns and income in a short time, they’re gone, with nothing left but stocks that haven’t had a big move yet.

We could write profitable calls on several positions right now. But I believe it will pay to be patient and let those stocks run higher before writing calls. I’ll endure the embarrassment (it won’t be the first time) of having no outstanding calls in the near term as a worthy sacrifice to the god of higher returns in the future.

In the meantime, several positions are still in the buy range and worthwhile acquisitions if you don’t own them already. And, as always, keep an eye out for trade alerts in your email.

Trades this month
March 17
Buy Enterprise Product Partners stock (EPD) - $23.13

March 24
Buy U.S. Bancorp stock (USB)
Buy KKR & Co. stock (KKR)

March 26
VLO March 26 $60 call at $6.50 - Expired
Valero Energy Stock (VLO) – Called

April 1
CVX April 1 $95.50 call at $4.30 - Expired
Chevron Corporation stock (CVX) - Called

Stock Portfolio Recap
AGNC Investment Corp. (AGNC) Yield 8.5%
AGNC has already trended higher since being added to the portfolio in January. We could write a call here and get a great income and insure a nice total return. But I want more. There really isn’t any reason why the stock won’t continue to trend still higher in the weeks ahead. We can wait until it gets further above 17 per share so that we can write the calls at a 17 strike price at a big fat premium. BUY

Brookfield Infrastructure Partners (BIP) Yield 3.8%
The stock got a bump this week and made a new all-time high. It looks like the Inter Pipeline acquisition will go through at the price Brookfield offered. The market had fretted that after the rejection of the initial offer as too cheap Brookfield would counter with a much higher offer. But they stuck to their guns. And the offer appears to be going through at a great price. This acquisition should be a needle-mover that will juice already rising earnings over the course of the year. BUY

Chevron Corp. (CVX) – Called

Digital Realty Trust, Inc. (DLR) Yield 3.2%
This data center REIT is still cheap, and seems to be trending higher. It’s at the high point of the recent downtrodden range. Hopefully, it will break out from here. We’ll see. This is a fantastic specialty REIT with a growing business that deserves a much higher price. But the stock isn’t getting any love at all and has been cursed since being a superstar performer in the dark days of the pandemic bear market. The market will wise up eventually. Let’s hope it’s soon. BUY

Enterprise Product Partners (EPD Yield 8.1%
This is a great segue after talking about stocks that don’t get any love. While most energy stocks exploded higher in the last several months, EPD meekly followed at a snail’s pace. The good news is that it has been trending higher of late. It’s up 36% since the vaccine announcement in November, though it has severely lagged the energy sector. It’s doesn’t have rapidly rebounding profits because it has a resilient business and earnings didn’t take a big hit during the pandemic. But EPD is certainly trending in the right direction and offers great value with a massive (and safe) yield. BUY

KKR & Co. (KKR) Yield 1.1%
This best-in-class alternative investment financial company is looking great. It’s only been in the portfolio a couple of weeks, but it has been trending unmistakably higher. It’s already at a level where we could write a very attractive call and guarantee a good return in a short time. But I want to give this one some room to stretch its legs first. It looks like it wants to bestow more bounty in the near term. Let’s let it, and wait for a higher price and more of everything. BUY

NextEra Energy Inc, (NEE) Yield 2.1%
I believe we got into this regulated and alternative energy utility at a cheap price amidst a rare dip. While it hasn’t officially broken out of the recent lower range, it’s on the right track. I have no doubt that this highly desired regulated and alternative energy utility will get right back into investors’ good graces. But I still don’t know if it will do so right away. Good things lie ahead. We’ll just have to wait and see if it takes just weeks or months to reap the splendor. BUY

U.S. Bancorp (USB) Yield 3.0%
Yeah, this bank is looking strong. It’s still cheap ahead of a perfect storm of rising rates and a booming economy. We could absolutely pull the trigger here and get a fat call with the promise of a strong total return in a short time. But we’ve owned USB twice already in the portfolio. And, although we got great returns, I feel that we settled for too little each time. This time around I want more. The tape looks like it wants to keep giving us more. Let’s let it run further before writing a call this time. BUY

Existing Call Trades
CVX April 1 $95.50 call at $4.30 - Expired

  • Call premium: $4.30
    Dividend: $1.29 (paid March 10)
    Appreciation: $9.81 ($95.50 strike price minus $85.69 purchase price)

  • Total: $15.40 (total return of 18% in just over three months)

Open RecommendationsTicker SymbolEntry DateEntry PriceRecent
Buy at or
Under Price
YieldTotal Return
AGNC Investment Corp.AGNC01/13/2115.5217.0017.008.59%11.99%
Brookfield InfrastructureBIP01/13/2150.6354.6153.003.75%8.92%
Digital Realty TrustDLR1/27/21149.17145.77155.003.24%-1.43%
NextEra Energy, inc.NEE2/24/2173.7676.7880.002.03%4.64%
Enterprise Product PartnersEPD3/17/2123.2122.2625.008.08%-3.76%
U.S. BancorpUSB3/24/2153.4756.3755.003.01%6.22%
KKR & Co.KKR3/24/2147.9851.1650.001.15%6.63%
Open RecommendationsTicker SymbolIntial
Entry DateEntry

Buy Under or
Sell Down To

Total Return
As of Close on 4/5/21
SecurityTicker SymbolActionEntry DateEntry
Sale DateSale PriceTotal Return
Innovative Industrial Props.IIPRCalled6/2/2087.829/18/20100.0015.08%
U.S. BancorpUSBCalled7/22/2036.269/18/2038.003.42%
Brookfield Infras. Ptnrs.BIPCalled6/24/2041.9210/16/2045.008.49%
Starbucks Corp.SBUXCalled8/26/2082.4110/16/2088.006.18%
Visa CorporationVCalled9/22/20200.5611/20/20200.000.00%
AbbVie Inc.ABBVCalled6/2/2091.0412/31/20100.0012.43%
Enterprise Prod. Prtnrs.EPDCalled6/24/2018.141/15/2120.0015.16%
Altria GroupMOCalled6/2/2039.661/15/2140.007.31%
U.S. BancorpUSBCalled11/25/2044.681/15/2145.001.66%
B&G Foods Inc,BGSCalled10/28/2026.792/19/2128.004.42%
Valero Energy Inc.VLOCalled8/26/2053.703/26/2160.0011.73%
Chevron Corp.CVXCalled12/23/2085.694/1/2196.0012.95%
SecurityIn/out moneySell DateSell PriceExp. Date$ ReturnTotal % Return
IIPR Jul 17 $95 callout-of money6/3/203.007/17/203.003.40%
MO Jul 31 $42 callout-of-money6/17/201.607/31/201.604.03%
ABBV Sep 18 $100 callout-of-money7/15/204.609/18/204.605.05%
IIPR Sep 18 $100 callin-the-money7/22/205.009/18/205.005.69%
QCOM Sep 18 $95 callin-the-money6/24/204.309/18/204.304.82%
USB Sep 18 $37.50 callin-the-money7/22/202.009/18/202.005.52%
BIP Oct 16 $45 callin-the-money9/2/201.9510/16/201.954.65%
SBUX Oct 16 $87.50 callin-the-money10/16/203.3010/16/203.304.00%
V Nov 20 $200 callin-the-money9/22/2010.0011/20/2010.004.99%
ABBV Dec 31 $100 callin-the-money11/18/203.3012/31/203.303.62%
EPD Jan 15 $20 callin-the-money11/23/200.801/15/210.804.41%
MO Jan 15 $40 callin-the-money11/25/201.901/15/211.904.79%
USB Jan 15 $45 callin-the-money11/25/202.001/15/212.004.48%
BGS Feb 19 $27.50 callin-the-money12/11/202.402/19/212.408.96%
VLO Mar 26 $60 callin-the-money2/10/216.503/26/216.5012.10%
CVX Apr 1 $95.50 callin-the-money2/19/21$4.304/1/21$4.305.02%