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Income Advisor
Conservative investing. Double-digit income.

February 2, 2022

The first month of 2022 is in the books. And it wasn’t good. It was the worst month since March of 2020.

2022: Bad for the Market, Great for Energy
The first month of 2022 is in the books. And it wasn’t good. It was the worst month since March of 2020.

The S&P 500 was down 5.38% in January. The technology-heavy Nasdaq finished the month down 10%. And the numbers were only that good because of the big up day on Monday.

The bulls and bears are fighting it out between another strong earnings season and the fact that the Fed will have to aggressively raise rates to combat inflation. Some Wall Street banks are now predicting six or seven 0.25% rate hikes in 2022, up from the recent forecast of three or four.

The Fed will have to inflict some pain on the market and economy this year and probably next. Investors are grappling with that bummer. But earnings are good again. Strongly growing profits have saved and revived this market throughout the recovery. We’ll see what catalyst wins the tug-o-war over the next few weeks. The selling pressure might not be over.

Meanwhile, energy stocks are killing it. While 10 of the 11 S&P 500 sectors were down in January, energy is the only sector that’s up this year, and it’s up big. Energy stocks soared 19% for the month while everything else floundered. These stocks are still relatively cheap, after nearly a decade of lousy performance, and they pay high dividends. But, above all, the stocks tend to thrive with inflation.

The timing looks good for our recent spate of covered call selling, as the stocks were near the highs before the selloff. But several of the portfolio stocks have come roaring back over the past couple of days. And several will report earnings in the near future

Trades past month
January 5
Sold OKE February 18 $60 calls at $2.75

January 13
Sold USB February 25 $61 calls at $2.50

January 18
Sold VLO February 25 $83 calls at $4.20

January 19
Sell AGNC Investment Corp. (AGNC) - $15.06

January 21
QCOM January 21 $185 calls at $9.65 – Expired

January 26
Xcel Energy (XEL) – rating change “BUY” to “HOLD”
FS KKR Capital Corp. (FSK) – rating change “BUY” to “HOLD”

Stock Portfolio Recap
Enterprise Product Partners (EPD)
Yield 7.9%
True, the recent rally in this midstream energy partnership has leveled off over the past couple of weeks. But EPD has also held mighty steady in an ugly market. It’s been a great year for energy stocks so far amidst the high demand and rising prices, and EPD is benefitting. From here, it still looks good. EPD still sells at a dirt-cheap valuation, the sky-high distribution is very safe, and business is good. We will look to supplement that high-yield income with a call premium when the price is right. (This security generates a K1 form at tax time). BUY

FS KKR Corp. (FSK)
Yield 11.4%
I like what I’m seeing. It’s been a rotten market this year. But nobody told FSK. It’s up over 4% so far. FSK broke the recent downtrend and might make a run back up the recent highs. Earnings were solid as FSK continues to benefit from the current environment. Strong economic growth is good for small companies. When it gets a little higher there should be a good call writing opportunity. HOLD

KKR & Co., Inc. (KKR)
Yield 0.8%
The action over the past week is encouraging. This alternative investment asset manager has been trending consistently lower since early November. But it is up sharply over the last week and may be breaking the trend. The past few quarters have been phenomenal as business is booming. KKR reports fourth-quarter earnings next week. Hopefully it gets a big bounce and gets going again. When it does, there should be yet another good call writing opportunity. HOLD

One Liberty Properties, Inc. (OLP)
Yield 5.4%
This industrial REIT has really been clobbered so far this year after performing exceptionally well in the prior months. Stellar earnings had propelled the stock to new highs. But the recent ugly market has taken all those gains away. It’s down about 17% from the high in early January. REITs have been one of the worst performing sectors and OLP is a more cyclical and aggressive one. But the 6% payout should continue to make it attractive and real estate should hold up well against inflation. HOLD

Yield 6.3%
Things are looking better for this midstream energy star. It had trended downward from the highs of October. Then it got new life in the energy rally of December and January, until the market got ugly. But it has been trending higher again over the last week or so. I still like energy and OKE. OKE is still 10% below the 52-week high and a long way below the pre-pandemic high, despite having higher earnings now. HOLD

Qualcomm Corp. (QCOM)
Yield 1.6%
This chipmaker stock had a huge rally a few months ago and then didn’t consolidate but held strong despite weakness in the sector. But the torrid selloff in technology finally took it down last month. It fell nearly 17% from the high by late last week. But it has rebounded very strongly over the past few days as the technology selling has abated. External market factors have dragged it down while the internal performance has been stellar. QCOM reports earnings today, and they are likely to be stellar. Hopefully the report gets the stock back up where it belongs. HOLD

U.S. Bancorp (USB)
Yield 3.2%
This regional bank stock caught fire in the first half of January as a steepening yield curve promised to juice profits. But USB gave it all back in the second half of the month and the market turned treacherous. USB also missed slightly on earnings, but the last quarter didn’t incorporate the higher interest rates. Despite the near-term volatility, USB should be poised for a strong year as business is strong and should get stronger and interest rates rise. HOLD

Valero Energy Corp. (VLO)
Yield 4.7%
The indiscriminate selling of the past couple weeks even took VLO down. But VLO has regained traction as the market stabilized. The company killed it on earnings last week as it beat estimates by a lot. EPS grew to $2.47 per share from a loss of $1.06 and revenues more than doubled from the year-ago quarter. As anticipated, Valero is benefitting from much higher volumes and margins, and demand and pricing are strong. Meanwhile, VLO is still well below the pre-pandemic price ahead of a likely strong year. HOLD

Visa Inc. (V)
Yield 0.7%
The card company stock has been languishing in this troubled market. But it reported blowout earnings last week and the stock jumped over 10% on the day of the report. As anticipated, international business is picking up as are the very profitable cross-border transactions as travel returns. The stock should continue to have a good year as the company benefits from a fuller recovery in 2022. BUY

Xcel Energy Inc. (XEL)
Yield 2.6%
This alternative energy utility has been solid and barely budged during the market turmoil of the last few weeks. Utilities have been a solid performing market sector since things got ugly as investors seek defense and safe havens. It’s a good market to own utilities. But XEL also has the added benefit of being on an uptrend and providing a safe way to play the growth in alternative energy. XEL is strong for now and probably stronger later in the year as investors rediscover clean energy growth. HOLD

Existing Call Trades
Sell OLP February 18 $35 calls at $1.50 or better
The stock is way down and the calls are nowhere, selling at just $0.05. I still like the stock and we struck with the calls while the stock was near the high. While it seems unlikely at this point that the stock will hit the strike of 35 per share later this month, currently trading just over 30, the $1.50 of extra income will assure a double-digit annual income.

Sell OKE February 18 $60 calls at $2.75 or better
The stock could be called as it is currently 61 per share with a little over two weeks before expiration. Much will depend on the behavior of the overall market. Unless the selling resumes, energy and OKE should continue to be strong. That’s OK, this is the third call sold on the same position and we will lock in a huge income no matter what.

Sell USB February 25 $61 calls at $2.50 or better
This is also the third call sold on USB. The stock is still almost $3 per share below the strike price. We’ll see what happens in February. If shares are called, we’ll get a high total return to go with the huge income already generated. If not, we’ll sell another call before long and get even more income.

Sell VLO February 25 $83 calls at $4.20 or better
Recent action in the stock suggests there is a good chance the stock will be called. Earnings were strong and the stock has rallied more than a dollar above the strike price. Much will depend on the behavior of the overall market. But in the absence of selling pressure, energy stocks are likely to remain strong.

Open RecommendationsTicker SymbolEntry DateEntry PricePrice on
Buy at or
Under Price
YieldTotal Return
Enterprise Product PartnersEPD3/17/202123.2123.6425.007.86%10.41%
U.S. Bancorp CUSB3/24/202153.4758.1957.003.16%12.21%
Qualcomm Inc.QCOM5/5/21134.65175.76140.001.63%32.31%
ONEOK, Inc. COKE5/26/2152.5160.6860.006.31%21.25%
One Liberty Properties C.OLP7/28/2130.3730.5033.005.98%3.22%
KKR & Co., Inc.KKR8/25/2164.5271.1670.000.85%10.49%
Xcel Energy Inc.XEL10/12/2163.0069.6667.002.62%11.33%
FS KKR Capital Corp.FSK10/27/2122.0121.9124.0011.38%2.62%
Valero Energy Corp. CVLO11/17/2173.4582.9785.004.72%14.47%
Visa Inc.V12/22/21217.96226.17225.000.66%3.77%
Open RecommendationsTicker SymbolIntial
Entry DateEntry
Price on
Sell To Price
or Better
Total Return
OLP Feb 18 $35 callOLP220218C00035000Sell11/19/211.500.051.504.94%
OKE Feb 18 $60 callOKE220218C00060000Sell1/5/222.752.142.755.24%
USB Feb 25 $61 callUSB220225C00061000Sell1/13/222.500.482.504.68%
VLO Feb 25 $83 callVLO220225C00083000Sell1/18/224.202.574.206.13%
SecurityTicker SymbolActionEntry DateEntry
Sale DateSale PriceTotal Return
Innovative Industrial Props.IIPRCalled6/2/2087.829/18/20100.0015.08%
U.S. BancorpUSBCalled7/22/2036.269/18/2038.003.42%
Brookfield Infras. Ptnrs.BIPCalled6/24/2041.9210/16/2045.008.49%
Starbucks Corp.SBUXCalled8/26/2082.4110/16/2088.006.18%
Visa CorporationVCalled9/22/20200.5611/20/20200.000.00%
AbbVie Inc.ABBVCalled6/2/2091.0412/31/20100.0012.43%
Enterprise Prod. Prtnrs.EPDCalled6/24/2018.141/15/2120.0015.16%
Altria GroupMOCalled6/2/2039.661/15/2140.007.31%
U.S. BancorpUSBCalled11/25/2044.681/15/2145.001.66%
B&G Foods Inc,BGSCalled10/28/2026.792/19/2128.004.42%
Valero Energy Inc.VLOCalled8/26/2053.703/26/2160.0011.73%
Chevron Corp.CVXCalled12/23/2085.694/1/2196.0012.95%
KKR & Co.KKRCalled3/24/2147.986/18/2155.0014.92%
Digital Realty TrustDLRCalled1/27/21149.177/16/21155.005.50%
NextEra Energy, Inc.NEECalled2/24/2173.769/17/2180.0010.00%
Brookfield Infras. Ptnrs.BIPCalled1/13/2150.6310/15/2155.0011.65%
AGNC Investment CorpAGNCSold1/13/2115.521/19/2215.005.92%
SecurityIn/out moneySell DateSell PriceExp. Date$ 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-money2/19/214.304/1/214.305.02%
AGNC Jun 18 $17 callout-of-money4/13/210.506/18/210.503.21%
KKR Jun 18 $55 callin-the-money4/28/213.006/18/213.006.25%
USB Jun 16 $57.50 callout-of-money4/28/212.806/18/212.805.24%
DLR Jul 16 $155 callin-the-money6/16/218.007/16/218.005.36%
AGNC Aug 20 $17 callout-of-money6/23/210.508/20/21$0.503.00%
OKE Aug 20 $57.50 callout-of-money6/23/213.508/20/21$3.506.67%
NEE Sep 17 $80 callin-the-money8/11/213.509/17/21$3.504.75%
BIP Oct 15 $55 callin-the-money9./01/20212.0010/15/21$2.003.95%
USB Nov 19 $60 callout-of-money9/24.20212.3011/19.2021$2.304.30%
OKE Nov 26 $65 callout-of-money10/20/212.2511/26/21$2.254.28%
KKR Dec 17 $75 callout-of-money10/26/213.5012/17/21$3.505.42%
QCOM Jan 21 $185 Callout-of-money11/30/2021$9.651/21/2022$9.657.17%