Profit from the Energy Boom
After two glorious years of being up over 20%, the market is sputtering a bit. While the S&P is still up slightly for the year, it’s at the same level it was three months ago. Is the bull market running out of gas?
Although stock prices may consolidate after such a strong run higher, the bull market is likely to endure. It’s only the third year of a bull market while the average bull market over the last 100 years has lasted more than twice this long with a 152% return. Recent bull markets have lasted much longer with higher returns.
There’s also a lot to like about the current environment. Interest rates have likely peaked and should trend lower. A higher level of economic growth is expected with the new Administration. Overall earnings growth is the strongest in years. And the artificial intelligence catalyst is likely to continue for years.
Of course, there are concerns. There always are. There are major uncertainties regarding interest rates, tariffs, artificial intelligence spending, and many other things. The benchmark ten-year Treasury rate recently climbed to the highest level since 2023 before pulling back. Stocks have largely priced in a peak in interest rates. If the rate moves up again beyond the 2023 peak of 5%, the market won’t like it. Plus, market valuations are quite high.
But while the market may seem expensive, a look under the hood tells a different story. This bull market has been driven higher by technology and the artificial intelligence catalyst. Without a handful of large technology companies, the bull market returns so far would be quite lame. In fact, from the beginning of 2022 through January, the “Magnificent 7” stocks accounted for 55% of the S&P 500 gains. Without those seven stocks, the bull market returns would be less than half.
But things are changing. There are good reasons to believe the relative returns of the rest of the market should vastly improve.
The market rally started to broaden out last summer. Utilities and REITs came on strongly in the second half last year as the interest rate narrative improved. Cyclical and energy stocks led the market higher after the election. So far this year, the best performing of the 11 S&P 500 market sectors are Materials, Financials, Communication Services, and Energy. In fact, Information Technology is the second worst-performing sector YTD.
Other stocks are picking up the slack while technology is wobbling. The grossly lopsided performance couldn’t last. And there’s more to the story than just sector rotation. Earnings are catching up.
Average earnings growth on the S&P 500 is expected to be 14.8% in 2025 (according to FactSet). That’s the strongest growth in years and far above the ten-year trailing average growth rate of 8%. The difference is coming from the growth in non-technology companies. In 2024, the average earnings growth rate of the “Magnificent 7” exceeded that of the other 493 companies by 28%. That difference is expected to fall to just over 7% in 2025.
There is a strong opportunity in the energy sector. There are powerful reasons to believe certain energy stocks will benefit from increasing natural gas demand, more oil and gas drilling, and friendlier regulations. Some of these stocks have pulled back from the highs and offer an attractive entry point. In this issue, I highlight two energy stocks that are likely in a multi-year bull market and that historically generate high call premiums.
What to Do Now
This is a tough one in the near term. The market probably won’t continue going sideways for much longer. At some point soon, either stocks sell off or regain upward traction. It’s hard to tell which.
But there are always selloffs even in strong bull markets. It’s normal and healthy, and such events create opportunity. Of course, the rally has broadened and the long-neglected sectors that are still somewhat cheap could gain more traction and lead the market higher.
I still like all the BUY-rated stocks in the portfolio. It’s hard to predict the next turn the market may take, but the portfolio is diversified. I also see a buying opportunity in the energy sector.
The perception is that energy stocks should benefit from more drilling, relaxed regulations, and a stronger economy in the Trump administration. But it can be a double-edged sword for energy. More drilling will likely lead to lower oil and gas prices. Most energy stocks are commodity sensitive and suffer when prices fall. But certain stocks benefit from more drilling activity. Those stocks should be in prime position.
Midstream energy stocks don’t rely on commodity prices but rather charge a fee for the transport, storage and processing of oil and gas. Those stocks should benefit. But while such stocks were riding high, they have pulled back on new concerns about energy demand. Natural gas, the primary fuel for electricity generation, and related stocks were on fire but fell after the DeepSeek news last month on fears of lower than anticipated electricity demand.
But electricity demand should continue to grow. And these stocks have a lot of other things going for them as well. Natural gas production is likely to boom. It’s also the fastest-growing fossil fuel source with likely continuing strong demand in the U.S. and abroad. The recent selloff provides a good energy point.
Recent Activity
January 21st
Sell CQP March 21st $60 call at $3.00 or better
January 28th
Purchased Broadcom Inc. (AVGO) - $207.36
February 25th
BUY Cheniere Energy, Inc. (LNG)
BUY ONEOK, Inc. (OKE)
Featured Actions
Buy Cheniere Energy, Inc. (LNG)
Houston-based Cheniere Energy is primarily engaged in the liquefaction and export of natural gas. The company also markets and pipes liquid natural gas (LNG) and its facilities are located near the Gulf of Mexico in Southwest Louisiana and South Texas.
Cheniere owns and operates two major liquefaction facilities including the Sabine Pass Terminal, which it owns through its stake in existing portfolio position Cheniere Energy Partners (CQP), and the Corpus Christi Terminal, which is currently undergoing a major expansion. The facilities provide the bulk of revenues, but it also markets natural gas through Cheniere Marketing and owns the Creole Trail Pipeline.
Here’s the deal. Because of new technologies in horizontal drilling and hydraulic fracturing (fracking), massive supplies of previously irretrievable oil and gas deposits trapped in shale rock formations throughout the country can now be accessed. As a result, this country became the world’s largest producer of natural gas more than a decade ago.
This country was able to produce far more natural gas than it could currently use. At the same time, they are starving for the stuff in other parts of the world, and the gas is cheap here and expensive there.
While natural gas can be piped across this continent, you can’t pipe it across the oceans. To export large quantities of natural gas to places like Europe and Asia, gas must be converted to liquid form, put on to tankers, and shipped. But since we didn’t have an abundance of natural gas before, there were no massive liquefaction and export facilities in this country. That’s where Cheniere came in.
Sabine Pass was the first major facility built in this country to liquify and export natural gas. Cheniere only began operations in 2016 and it’s already the largest producer of LNG in the United States and the second-largest LNG operator in the world. Cheniere has also achieved the following:
- 11%-plus of all global LNG supply.
- 8% of U.S. natural gas production processed daily.
- 39 countries and regions delivered to.
- #1 supplier of LNG to Europe.
- Major supplier to Asia.
But this is just a snapshot in time, and Cheniere is still young and expanding. The Corpus Christi Terminal currently has three trains (NG liquefaction systems) and seven more are currently under construction, and most of the capacity is expected to become operational in 2025 and 2026.
Capacity will continue expanding beyond next year to meet the growing demand. Cheniere was already the number one supplier of LNG to Europe in 2022 and 2023. It is expected to supply the bulk of demand growth in China in the years ahead.
Changes are already beginning. Just since the election, officials at the European Union have already expressed interest in getting natural gas from the U.S. instead of Russia. That would be a huge additional market.
The market seems to agree that LNG should be a beneficiary of the new administration as the stock is already up 15% since the election despite a recent pullback.
Cheniere Energy, Inc. (LNG)
Security type: Common Stock
Sector: Energy
Price: $220
52-week range: $152.31 - $257.65
Yield: 0.90%
Profile: Cheniere is the largest U.S. exporter of liquid natural gas (LNG) and the second largest LNG exporter in the world.
Positives
- Access to abundant and cheap U.S. natural gas for export at a higher price.
- Global LNG market is growing, and Cheniere is aggressively expanding capacity.
- Cheniere was first and has a leg up on the competition.
Risks
- Qatar produces LNG at a lower cost.
- Much anticipated growth in exports is attributable to China and it could be jeopardized if relations sour.
Cheniere Energy, Inc. (LNG)
Next ex-div date: May 7, 2025, est.
Buy ONEOK Inc. (OKE)
This stock is no stranger to the Cabot Income Advisor portfolio. OKE has been held in the portfolio on four other occasions and was called at a profit each time. There were also eight calls sold on OKE in the four other stints in the portfolio for total premiums of $25. It has been a highly successful position in the portfolio, and the stock has recently pulled back from the high. And the future looks bright.
ONEOK is a large U.S. midstream energy company specializing in natural gas. It owns one of the nation’s premier natural gas liquids (NGLs) systems connecting NGL supply in the Rocky Mountains, Midcontinent, and Permian regions in key market centers, and has an extensive network of natural gas gathering, processing, storage, and transportation assets.
Here are some things to like about the stock.
- Investment-grade-rated debt.
- 85% of earnings are fee-based.
- 27 years of stable and growing dividends.
- C corporation structure (generates a 1099, not a K-1).
The stock has been delivering strong results for a while. In the previous three calendar years, OKE returned 16%, 16%, and 48% respectively. Natural gas remains in high demand and the business has been quite resilient in any energy market or economy.
It got a big boost last year after the reported acquisition of midstream energy companies Enlink Midstream (ENLC) and Medallion Midstream. The deal closed in the fourth quarter of 2024 and earnings are expected to be accretive to earnings immediately. The market loves the deal. The stock took off after the announcement.
ONEOK, Inc. (OKE)
Security type: Common Stock
Sector: Energy
Price: $99
52-week range: $72.44 - $118.07
Yield: 4.20%
Profile: ONEOK is a large U.S. midstream energy company specializing in the transportation, storage, and processing of natural gas.
Positives
- Natural gas production is likely to increase during the Trump administration.
- Natural gas is the fastest-growing fossil fuel in the U.S. and overseas.
- A friendlier regulatory environment and increasing demand for electricity is likely to benefit ONEOK in the years ahead.
Risks
- Less regulation may mean more competition.
- Electricity demand growth may not be as high as anticipated.
ONEOK, Inc. (OKE)
Next ex-div date: May 3, 2025, Inc.
Portfolio Recap
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| AbbVie Inc. | ABBV | 12/17/24 | $175.38 | $202.08 | $200.00 | 3.25% | 16.33% |
| AGNC Investment Corp | AGNC | 9/24/24 | $10.47 | $10.54 | $12.00 | 13.66% | 7.05% |
| Ally Financial Inc. | ALLY | 11/26/24 | $39.42 | $37.49 | $45.00 | 3.20% | -4.16% |
| Broadcom Inc. | AVGO | 1/28/25 | $207.36 | $218.66 | $240.00 | 1.08% | 5.45% |
| Cheniere Energy, Inc. | LNG | 2/25/25 | $221.16 | $250.00 | 0.90% | ||
| Cheniere Energy Prtns. | CQP | 7/23/24 | $53.04 | $62.05 | $60.00 | 5.24% | 21.36% |
| Constellation Energy Corp. | CEG | 8/27/24 | $196.14 | $284.44 | $270.00 | 0.55% | 45.25% |
| NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $69.70 | $80.00 | 3.17% | -3.27% |
| ONEOK, Inc. | OKE | 2/25/25 | $98.10 | $110.00 | 4.20% | ||
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $165.34 | $180.00 | 2.06% | 33.17% |
| Realty Income Corp. | O | 6/27/23 | $60.19 | $57.09 | NA | 5.63% | 4.17% |
| Toll Brothers, Inc. | TOL | 10/22/24 | $148.02 | $111.48 | NA | 0.83% | -24.55% |
| Open Recommendations | Ticker Symbol | Initial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| CEG Mar 21 $260 | CEG250321C00260000 | Sell | 1/7/25 | $20.00 | $34.00 | $20.00 | 10.20% |
| QCOM Mar 21 $160 call | QCOM250321C00160000 | Sell | 1/7/25 | $11.00 | $9.03 | $10.00 | 7.43% |
| CQP Mar 21 $60 call | CQP250321C00060000 | Sell | 1/22/25 | $3.00 | $3.38 | $3.00 | 5.66% |
| as of close on 2/21/2025 | |||||||
| SOLD STOCKS | |||||||
| X | Ticker Symbol | Action | Entry Date | Entry Price | Sale Date | Sale Price | Total Return |
| Innovative Industrial Props. | IIPR | Called | 6/2/20 | $87.82 | 9/18/20 | $100.00 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95.00 | 7.30% |
| U.S. Bancorp | USB | Called | 7/22/20 | $36.26 | 9/18/20 | $38 | 3.42% |
| Brookfield Infras. Ptnrs. | BIP | Called | 6/24/20 | $41.92 | 10/16/20 | $45 | 8.49% |
| Starbucks Corp. | SBUX | Called | 8/26/20 | $82.41 | 10/16/20 | $88 | 6.18% |
| Visa Corporation | V | Called | 9/22/20 | $200.56 | 11/20/20 | $200 | 0.00% |
| AbbVie Inc. | ABBV | Called | 6/2/20 | $91.04 | 12/31/20 | $100 | 12.43% |
| Enterprise Prod. Prtnrs. | EPD | Called | 6/24/20 | $18.14 | 1/15/21 | $20 | 15.16% |
| Altria Group | MO | Called | 6/2/20 | $39.66 | 1/15/21 | $40 | 7.31% |
| U.S. Bancorp | USB | Called | 11/25/20 | $44.68 | 1/15/21 | $45 | 1.66% |
| B&G Foods Inc, | BGS | Called | 10/28/20 | $26.79 | 2/19/21 | $28 | 4.42% |
| Valero Energy Inc. | VLO | Called | 8/26/20 | $53.70 | 3/26/21 | $60 | 11.73% |
| Chevron Corp. | CVX | Called | 12/23/20 | $85.69 | 4/1/21 | $96 | 12.95% |
| KKR & Co. | KKR | Called | 3/24/21 | $47.98 | 6/18/21 | $55 | 14.92% |
| Digital Realty Trust | DLR | Called | 1/27/21 | $149.17 | 7/16/21 | $155 | 5.50% |
| NextEra Energy, Inc. | NEE | Called | 2/24/21 | $73.76 | 9/17/21 | $80 | 10.00% |
| Brookfield Infras. Ptnrs. | BIP | Called | 1/13/21 | $50.63 | 10/15/21 | $55 | 11.65% |
| AGNC Investment Corp | AGNC | Sold | 1/13/21 | $15.52 | 1/19/22 | $15 | 5.92% |
| ONEOK, Inc. | OKE | Called | 5/26/21 | $52.51 | 2/18/22 | $60 | 19.62% |
| KKR & Co. | KKR | Sold | 8/25/21 | $64.52 | 2/23/22 | $58 | -9.73% |
| Valero Energy Inc. | VLO | Called | 11/17/21 | $73.45 | 2/25/22 | $83 | 15.53% |
| U.S Bancorp | USB | Sold | 3/24/21 | $53.47 | 4/13/22 | $51 | -1.59% |
| Enterprise Product Ptnrs | EPD | Called | 3/17/21 | $23.21 | 4/14/22 | $24 | 11.25% |
| FS KKR Capital Corp. | FSK | Called | 10/27/21 | $22.01 | 4/14/22 | $23 | 13.58% |
| Xcel Energy Inc. | XEL | Called | 10/12/21 | $63.00 | 5/20/22 | $70 | 12.66% |
| Innovative Industrial Props. | IIPR | Sold | 3/23/22 | $196.31 | 7/20/22 | $93 | -51.23% |
| One Liberty Properties | OLP | Sold | 7/28/21 | $30.37 | 8/24/22 | $25 | -12.94% |
| ONEOK, Inc. | OKE | Called | 5/25/22 | $65.14 | 1/20/23 | $65 | 2.66% |
| Xcel Energy, Inc. | XEL | Called | 10/26/22 | $62.57 | 1/20/23 | $65 | 4.67% |
| Realty Income Corp. | O | Called | 9/28/22 | $60.37 | 2/17/23 | $63 | 5.41% |
| Medical Properties Trust | MPW | Sold | 1/24/23 | $13.22 | 3/21/23 | $8 | -38.00% |
| Brookfield Infrastructure Cp. | BIPC | Called | 11/9/22 | $42.43 | 7/21/23 | $45 | 8.72% |
| Star Bulk Carriers Corp. | SBLK | Sold | 6/1/22 | $33.30 | 8/8/23 | $18 | -31.38% |
| Visa Inc. | V | Called | 12/22/21 | $217.16 | 8/18/23 | $235 | 9.16% |
| Global Ship Lease, Inc. | GSL | Sold | 2/23/22 | $24.96 | 8/29/23 | $19 | -13.82% |
| ONEOK, Inc. | OKE | Called | 3/28/23 | $60.98 | 9/15/23 | $65 | 9.72% |
| Hess Corporation | HES | Called | 6/6/23 | $132.25 | 10/20/23 | $155 | 17.87% |
| Tractor Supply Company | TSCO | Sold | 9/26/23 | $203.03 | 11/28/23 | $200 | -1.02% |
| Digital Realty Trust | DLR | Called | 7/18/23 | $117.31 | 1/19/24 | $135 | 17.16% |
| Intel Corporation | INTC | Called | 7/27/22 | $40.18 | 1/19/24 | $43 | 9.76% |
| AbbVie Inc. | ABBV | Called | 7/25/23 | $141.63 | 3/15/24 | $160 | 15.11% |
| Marathon Petroleum Corp. | MPC | Called | 10/24/23 | $149.45 | 3/28/24 | $165 | 12.06% |
| The Williams Companies, Inc. | WMB | Called | 8/24/22 | $35.58 | 5/17/24 | $35 | 7.14% |
| Main Street Capital Corp. | MAIN | Called | 3/26/24 | $46.40 | 9/20/24 | $49 | 10.91% |
| Brookfield Infrastructure Cp. | BIPC | Called | 2/27/24 | $32.64 | 9/20/24 | $35 | 11.00% |
| American Tower Corp. | AMT | Called | 1/23/24 | $202.26 | 9/20/24 | $210 | 5.43% |
| ONEOK, Inc. | OKE | Called | 8/27/24 | $79.59 | 10/18/24 | $88 | 11.18% |
| Alexandria Real Estate Eq. | ARE | Sold | 12/19/23 | $129.54 | 11/19/24 | $108 | -12.82% |
| FS KKR Capital Corp. | FSK | Called | 4/23/24 | $19.42 | 12/20/24 | $20 | 14.06% |
| Enterpise Product Ptnrs. | EPD | Called | 2/27/24 | $27.61 | 1/17/25 | $29 | 12.60% |
| EXPIRED OPTIONS | |||||||
| Security | In/out money | Sell Date | Sell Price | Exp. Date | $ Return | Total % Return | |
| IIPR Jul 17 $95 call | out-of money | 6/3/20 | $3.00 | 7/17/20 | $3.00 | 3.40% | |
| MO Jul 31 $42 call | out-of-money | 6/17/20 | $1.60 | 7/31/20 | $1.60 | 4.03% | |
| ABBV Sep 18 $100 call | out-of-money | 7/15/20 | $4.60 | 9/18/20 | $4.60 | 5.05% | |
| IIPR Sep 18 $100 call | in-the-money | 7/22/20 | $5.00 | 9/18/20 | $5.00 | 5.69% | |
| QCOM Sep 18 $95 call | in-the-money | 6/24/20 | $4.30 | 9/18/20 | $4.30 | 4.82% | |
| USB Sep 18 $37.50 call | in-the-money | 7/22/20 | $2.00 | 9/18/20 | $2.00 | 5.52% | |
| BIP Oct 16 $45 call | in-the-money | 9/2/20 | $1.95 | 10/16/20 | $1.95 | 4.65% | |
| SBUX Oct 16 $87.50 call | in-the-money | 10/16/20 | $3.30 | 10/16/20 | $3.30 | 4.00% | |
| V Nov 20 $200 call | in-the-money | 9/22/20 | $10.00 | 11/20/20 | $10.00 | 4.99% | |
| ABBV Dec 31 $100 call | in-the-money | 11/18/20 | $3.30 | 12/31/20 | $3.30 | 3.62% | |
| EPD Jan 15 $20 call | in-the-money | 11/23/20 | $0.80 | 1/15/21 | $0.80 | 4.41% | |
| MO Jan 15 $40 call | in-the-money | 11/25/20 | $1.90 | 1/15/21 | $1.90 | 4.79% | |
| USB Jan 15 $45 call | in-the-money | 11/25/20 | $2.00 | 1/15/21 | $2.00 | 4.48% | |
| BGS Feb 19 $27.50 call | in-the-money | 12/11/20 | $2.40 | 2/19/21 | $2.40 | 8.96% | |
| VLO Mar 26 $60 call | in-the-money | 2/10/21 | $6.50 | 3/26/21 | $6.50 | 12.10% | |
| CVX Apr 1 $95.50 call | in-the-money | 2/19/21 | $4.30 | 4/1/21 | $4.30 | 5.02% | |
| AGNC Jun 18 $17 call | out-of-money | 4/13/21 | $0.50 | 6/18/21 | $0.50 | 3.21% | |
| KKR Jun 18 $55 call | in-the-money | 4/28/21 | $3.00 | 6/18/21 | $3.00 | 6.25% | |
| USB Jun 16 $57.50 call | out-of-money | 4/28/21 | $2.80 | 6/18/21 | $2.80 | 5.24% | |
| DLR Jul 16 $155 call | in-the-money | 6/16/21 | $8.00 | 7/16/21 | $8.00 | 5.36% | |
| AGNC Aug 20 $17 call | out-of-money | 6/23/21 | $0.50 | 8/20/21 | $0.50 | 3.00% | |
| OKE Aug 20 $57.50 call | out-of-money | 6/23/21 | $3.50 | 8/20/21 | $3.50 | 6.67% | |
| NEE Sep 17 $80 call | in-the-money | 8/11/21 | $3.50 | 9/17/21 | $3.50 | 4.75% | |
| BIP Oct 15 $55 call | in-the-money | 9/1/21 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24/21 | $2.30 | 11/19/21 | $2.30 | 4.30% | |
| OKE Nov 26 $65 call | out-of-money | 10/20/21 | $2.25 | 11/26/21 | $2.25 | 4.28% | |
| KKR Dec 17 $75 call | out-of-money | 10/26/21 | $3.50 | 12/17/21 | $3.50 | 5.42% | |
| QCOM Jan 21 $185 Call | out-of-money | 11/30/21 | $9.65 | 1/21/22 | $9.65 | 7.17% | |
| OLP Feb 18 $35 Call | out-of-money | 11/19/21 | $1.50 | 2/18/22 | $1.50 | 4.94% | |
| OKE Feb 18 $60 Call | in-the-money | 1/5/22 | $2.75 | 2/18/22 | $2.75 | 5.24% | |
| USB Feb 25 $61 call | out-of-money | 1/13/22 | $2.50 | 2/25/22 | $2.50 | 4.68% | |
| VLO Feb 25 $83 call | in-the-money | 1/18/22 | $4.20 | 2/25/22 | $4.20 | 6.13% | |
| EPD Apr 14th $24 call | in-the-money | 3/2/22 | $1.25 | 4/14/22 | $1.25 | 5.69% | |
| FSK Apr 14th $22.50 call | in-the-money | 3/10/22 | $0.90 | 4/14/22 | $0.90 | 4.09% | |
| XEL May 20th $70 call | in-the-money | 3/30/22 | $3.00 | 5/20/22 | $3.00 | 4.76% | |
| SBLK July 15th $134 call | out-of-money | 6/1/22 | $1.60 | 7/15/22 | $1.60 | 4.80% | |
| OKE Oct 21st $65 call | out-of-money | 8/24/22 | $3.40 | 10/21/22 | $3.40 | 5.22% | |
| OKE Jan 20th $65 call | In-the-money | 11/25/22 | $3.70 | 1/20/23 | $3.70 | 5.68% | |
| XEL Jan 20th $65 call | in-the-money | 11/25/22 | $5.00 | 1/20/23 | $5.00 | 7.99% | |
| O Feb 17th $62.50 call | in-the-money | 12/28/22 | $3.00 | 2/17/23 | $3.00 | 4.97% | |
| QCOM Sep 16th $145 call | out-of-money | 7/20/22 | $11.75 | 9/16/22 | $11.75 | 8.73% | |
| V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/23 | $12.00 | 5.51% | |
| OKE May 19th $65 call | out-of-money | 4/11/23 | $2.70 | 5/19/23 | $2.70 | 4.43% | |
| V Jun 2 $230 call | out-of-money | 4/21/23 | $10.50 | 6/2/23 | $10.50 | 4.82% | |
| BIPC $45 July 21st call | in-the-money | 5/23/23 | $3.25 | 7/21/23 | $3.25 | 7.66% | |
| V $235 Aug 18th call | in-the-money | 7/11/23 | $9.00 | 8/18/23 | $9.00 | 4.13% | |
| GSL $20 Aug 18th call | out-of-money | 7/11/23 | $1.25 | 8/18/23 | $1.25 | 5.00% | |
| OKE $65 Sep 15 call | in-the-money | 9/15/23 | $3.20 | 7/25/23 | $3.20 | 4.92% | |
| INTC $35 Oct 20th call | out-of-money | 9/8/23 | $3.78 | 10/20/23 | $3.78 | 9.41% | |
| HES $155 Oct 20th call | in-the-money | 9/8/23 | $9.00 | 10/20/23 | $9.00 | 6.81% | |
| DLR $135 Jan 19th call | in-the-money | 11/22/23 | $6.00 | 1/19/24 | $6.00 | 5.11% | |
| INTC $42.50 Jan 19th call | in-the-money | 11/29/23 | $3.50 | 1/19/24 | $3.50 | 8.71% | |
| ABBV $160 Mar 15th call | in-the-money | 1/10/24 | $7.00 | 3/15/24 | $7.00 | 4.94% | |
| MPC $165 Mar 28th call | in-the-money | 2/14/23 | $10.00 | 3/28/24 | $10.00 | 6.69% | |
| QCOM $200 July 19th call | out-of-money | 6/5/24 | $12.00 | 7/19/24 | $12.00 | 8.91% | |
| MAIN $49.4 Sep 20th Call | in-the-money | 6/27/24 | $2.00 | 9/20/24 | $2.00 | 4.31% | |
| BIPC $35 Sep 20th Call | in-the-money | 7/16/24 | $3.00 | 9/20/24 | $3.00 | 9.19% | |
| AMT Sep 20 $210 call | in-the-money | 7/30/24 | $15.00 | 9/20/24 | $15.00 | 7.42% | |
| OKE Oct 18 $87.50 call | in-the-money | 8/27/24 | $3.50 | 10/18/24 | $3.50 | 4.40% | |
| FSK Dec 20 $20 call | in-the-money | 10/25/24 | $0.95 | 12/20/25 | $0.95 | 4.89% | |
| CEG Dec 29 $260 call | out-of-money | 9/25/24 | $24.00 | 12/20/24 | $24.00 | 12.24% | |
| EPD Jan 17 $29 call | in-the-money | 11/12/24 | $2.00 | 1/17/25 | $2.00 | 6.34% | |
AbbVie Inc. (ABBV)
Yield: 3.2%
Why don’t I suggest selling a call on ABBV? It’s because I think it’s going higher and I’m greedy. The stock has been trending higher since the earnings report last month and is now within just a couple bucks of the high. It tends to keep going higher when it does this. The main driver from the earnings was the performance of its immunology drugs Skyrizi and Rinvoq, which collectively delivered $5.61 billion in revenue for the quarter. Those drugs alone have replaced the Humira revenue which peaked at a little over $20 billion annually. The company also raised revenue forecasts on the two drugs by $4 billion to $31 billion a year by 2027. The earnings report showed Abbvie has replaced the Humira revenue. The patent cliff had been holding the stock back but that’s gone now. BUY
AbbVie Inc. (ABBV)
Next ex-div date: April 15, 2025
AGNC Investment Corp. (AGNC)
Yield: 13.7%
After a rough couple of years with rising inflation and interest rates, this mortgage REIT has returned about 15% YTD and is back near the 52-week high. Hopefully, it can keep going. The narrative and stock performance have been improving this year. The REIT reported solid earnings this quarter. Numbers were better for the full year but a little worse for the quarter as the environment took a slight step back. Spreads are still higher as the Fed Funds rate has already been cut 1% and longer rates are higher. AGNC had a bad run the last couple of years and it’s due for a significant turnaround. It should be set up for solid performance over the rest of 2025. BUY
AGNC Investment Corp. (AGNC)
Next ex-div date: February 28, 2025
Ally Financial Inc. (ALLY)
Yield: 3.2%
Ally is having a solid year, even though it pulled back last week along with just about everything else. It’s still up about 6% YTD. The online bank reported better-than-expected earnings last month and lower loan loss provisions in the quarter after loan loss worries had held the stock back. ALLY was floundering late last year but has had a strong move off the bottom. It started to rally after big bank earnings were stellar and the interest rate narrative improved. The good earnings report added fuel. Analysts are expecting earnings growth of 40% in 2025. ALLY is due for a move higher like its peers have had. BUY
Ally Financial Inc. (ALLY)
Next ex-div date: April 30, 2025, est.
Broadcom Inc. (AVGO)
Yield: 1.1%
This AI technology powerhouse had a strong bounce after the January selloff when it was purchased in the portfolio. But it’s been floundering lately and has given back most of that bounce. Technology stocks, which had driven the market higher for years, are having a bit of a comeuppance this year. There was the DeepSeek news last month and there is still fallout this week. But AVGO is being dragged down by the sector. Most of the issues don’t apply to Broadcom. Broadcom has a unique infrastructure niche that is not easily duplicated, and the stock has been successful for a very good reason: skyrocketing profits. It’s usually a good thing to be a tech stock. The sector and AVGO will come roaring back again. BUY
Broadcom Inc. (AVGO)
Next ex-div date: March 23, 2025, est.
Cheniere Energy Partners, L.P. (CQP)
Yield: 5.2%
Earnings
The partnership reported strong earnings last week that beat expectations. Although earnings decreased from last year because that was a record year, the numbers are historically high, and Cheniere has more production coming online in 2025. It exported a record amount of liquid natural gas (LNG) and now accounts for 10% of the global supply. The partnership also raised the distribution 15% over the past year and bought back $4 billion in units. Although CQP pulled back from the recent high this month, it’s still up 13% YTD and 28% since the election. (This security generates a K1 form at tax time). BUY
Cheniere Energy Partners (CQP)
Next ex-div date: May 10, 2025, est.
Constellation Energy Corporation (CEG)
Yield: 0.4%
Earnings
There’s news this week that is further eroding the share price. It was reported that Microsoft (MSFT) is canceling some leases for U.S. data centers, raising broader concerns that spending on AI data centers will be less than previously anticipated. The issue became a concern last month when Chinese company DeepSeek reported that its popular AI application ran on cheaper chips and used less energy. This week’s news feeds the already existing concern that electricity demand growth will be less than expected.
CEG stock soared last year after a deal was announced whereby Constellation will provide Microsoft with electricity later this decade from a reopened Three Mile Island reactor for a planned data center. Microsoft didn’t mention killing that deal. And the company is still planning on spending $80 billion on data centers. But CEG has flown higher in anticipation of more such deals and this news throws cold water on that. Meanwhile, Constellation reported better-than-expected earnings last week and raised revenue projections for 2025. HOLD
Constellation Energy Corp. (CEG)
Next ex-div date: March 7, 2025
NextEra Energy, Inc. (NEE)
Yield: 3.2%
The regulated and clean energy utility stock continues to languish near the lowest levels of the recent range. But it moved higher in last week’s selloff. That’s encouraging. Operational results have been good with earning growth of 8.2% and a reiterated outlook through 2027. The utility also announced plans to restart its Duane Arnold nuclear plant and a collaboration with GE Vernova to develop natural gas-fired projects across the U.S. The utility is taking advantage of the soaring electricity demand, and the projects are likely to deliver more revenue and stronger growth going forward. But this stock needs to generate more lasting upside traction. BUY
NextEra Energy, Inc. (NEE)
Next ex-div date: February 28, 2025
Qualcomm Corp. (QCOM)
Yield: 2.1%
The mobile device chip company delivered earnings with strong quarterly results and raised guidance for 2025. Revenue rose 17% for the quarter and EPS rose 24%. Both easily exceeded expectations. There was solid growth in just about every segment including iPhone demand. And guidance was raised for this year. But there wasn’t evidence of a strong AI smartphone upgrade cycle. And that’s really what the market is looking for. Several analysts expect an upgrade cycle to ignite sometime this year. And that could really move the stock higher. But a breakout is unlikely until that event is within sight. Meanwhile, QCOM has been wallowing with the rest of the tech sector. BUY
Qualcomm Incorporated (QCOM)
Next ex-div date: March 6, 2025
Realty Income Corp. (O)
Yield: 5.6%
The legendary monthly income REIT moved off the recent bottom earlier this year but had been going sideways for a while. O did have an impressive spike last week when the rest of the market sold off. It’s showing some defensive chops. The REIT has a stable and growing business and an unparalleled track record of increasing monthly dividends, O has been a slave to the changing interest rate narrative. Lately, that’s been mostly a bad thing. But a rise in defensive stocks could turn things around. Hopefully, this stock can bust a move soon somehow and we can sell a call to boost the return. HOLD
Realty Income Corporation (O)
Next ex-div date: March 3, 2025
Toll Brothers, Inc. (TOL)
Yield: 0.6%
Earnings
Mortgage rates moved back up again. There have been a growing number of negative stories regarding housing demand. The luxury homebuilder reported earnings last week that missed expectations. As a result, TOL has plunged 30% from the high in late November. Although the price is down to about 111 per share, analysts still have a price target of 150 per share for this year. Earnings only missed slightly and there is a lot of variability in possible outcomes over the next year. We will continue to hold for now on the possibility of a bounce-back after the plethora of bad news. HOLD
Toll Brothers, Inc. (TOL)
Next ex-div date: April 10, 2025, est.
Existing Call Trades
Sell CEG March 21st $260 call at $20 or better
Wow. The stock has really come down. It’s currently less than 5 per share above the strike price. It was 57 above the strike price last week. The stock has been a highflyer and recent troubling news hit CEG hard. I still believe in the stock as electricity demand will remain strong and there could be more deals announced. If the stock plunges further, I will consider buying back the calls and clearing the way to hold the stock. But the call price is still around the 20 range as investors likely anticipate a bounce.
Sell QCOM March 21st $160 call at $11 or better
The stock moved above the strike price after a strong January. But it has pulled back again with the recent crummy tech market. It’s less than 5 per share above the strike price with a little less than a month to go before expiration. QCOM has a good chance to take off sometime this year, but we’ll see where the price is on options expiration. We secured a great income in addition to the four other calls sold on this stock over the past few years.
Sell CQP March 21st $60 call at $3.00 or better
The stock is still above the strike price after a big move earlier this year. The price has pulled back this month, but last week’s earnings were solid and the stock may be poised for another rise. This week’s purchase of parent company Cheniere Energy (LNG) gives us exposure to the rising LNG market even if CQP gets called.
Income Calendar
Ex-Dividend Dates are in RED and italics. Dividend Payments Dates are in GREEN. Confirmed dates are in bold, all other dates are estimated. See the Guide to Cabot Income Advisor for an explanation of how dates are estimated.
The next Cabot Income Advisor issue will be published on March 25, 2025.
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