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Income Advisor
Conservative investing. Double-digit income.

January 7, 2025

The market sobered up in December after a big post-election rally in November. The S&P fell 2.5% in the last month of the year. But January has started out with stocks up 2.2% already.

Technology is driving the market higher. The sector is taking off after Nvidia (NVDA) issued bullish statements about demand for its artificial intelligence chips. AI is a huge growth catalyst for the market’s largest sector and has proven it can drive the indexes higher all by itself. In fact, technology has been the primary catalyst for the S&P over most of this bull market. But things might be changing.

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2025 Starts Hot

The market sobered up in December after a big post-election rally in November. The S&P fell 2.5% in the last month of the year. But January has started out with stocks up 2.2% already.

Technology is driving the market higher. The sector is taking off after Nvidia (NVDA) issued bullish statements about demand for its artificial intelligence chips. AI is a huge growth catalyst for the market’s largest sector and has proven it can drive the indexes higher all by itself. In fact, technology has been the primary catalyst for the S&P over most of this bull market. But things might be changing.

While AI will likely continue to be a powerful growth catalyst, its dominance over everything else might not be as pronounced in 2025 as it had been in the past. Earnings in the rest of the market are catching up. In 2024, the “Magnificent 7” grew earnings at an average rate of 33% compared to 4.2% for the other 493 stocks in the S&P 500. But that differential is expected to decline to 21.3% growth for the Magnificent 7 and 13% for the rest of the market.

Ultimately, stock prices are driven by earnings. Strong earnings for the overall market suggest a broader rally going forward. That should be good news for the other stock sectors. Even if index returns cool off after two straight years of over 20%, several sectors may post even better performance than they have over the past two years.

However, there could also be more volatility going forward because of uncertainty regarding the Fed and the policies of the incoming Trump administration. With more down-to-earth market returns, dividends and income become a bigger part of the formula. With a strong chance of more volatility, it is prudent to take advantage of stocks that rally near the high by selling covered calls and locking in a high income.

In this update, I highlight two new high-priced covered calls on stocks that we have very successfully sold calls on in the past.

Past Month Activity

December 17
Sell TOL Jan 17th $165.00 calls at $9.65 – Remove

Purchased AbbVie Inc. (ABBV) – $175.38

December 20
Sell CEG Dec 20th $260.00 calls at $24.00 – Expired

Sell FSK Dec 20th $20.00 calls at $0.95 or better – Expired

FS KKR Capital Corp. (FSK) – Called

January 7
Sell CEG March 21st $260 call at $20 or better

Sell QCOM March 21st $160 call at $10 or better

NextEra Energy, Inc. (NEE) – Rating change – “HOLD” to “BUY”

TRADE ALERT

Sell CEG March 21st $260 call at $20 or better

Expiration date: March 21

Strike price: $260.00

Call price: $20.00

Constellation Energy Corporation (CEG)

The stock price soared 13% in the first two trading days of the new year after returning 95% in 2024. The rise was driven by the announcement of a new deal to provide power for government agencies. CEG also got a huge bump in September after announcing an agreement with Microsoft (MSFT) to provide power to a planned data center. The stock pulled back after the September surge. But not before we sold a call that provided a better than 12% income return. CEG should be a good stock for the rest of the year, but there is a good chance it will pull back. The recent surge has provided investor optimism and huge call premiums.

Here are the three scenarios.

1. The stock closes above the $260.00 strike price at expiration.

Call premium: $20.00

Dividends: $0.71

Appreciation: $63.86 ($260.00 strike price minus $196.14 purchase price)

Total: $84.57 (total return will be 43.1% in 7 months and 55.4% with the previous $24 call)

2. The stock price closes below but near our $260.00 strike price.

Call premium: $20.00

Dividends: $0.71

Total: $20.71 (total income of 10.6% in 7 months and 22.8% with the previous call)

3. The stock price declines.

There will be $20.71 in income to offset the decline. Plus, the original purchase price is $64 per share below the strike price.

TRADE ALERT

Sell QCOM March 21st $160 call at $10 or better

Expiration date: March 21st

Strike price: $160.00

Call price: $10.00

Qualcomm Inc. (QCOM)

The stock has a very promising future as AI is likely to come to mobile devices, where Qualcomm is king. But that realization and price hike are likely not going to happen in the next couple of months. The stock has been stuck around the same level since August. It should be another chance to ring the income register again before the stock takes off (four calls have already been sold on the position for a total of $43.40 in premiums).

Here are the three scenarios.

2. The stock closes above the $160.00 strike price at expiration.

Call premium: $10.00

Dividends: $12.32

Appreciation: $25.35 ($160.00 strike price minus $134.65 purchase price)

Total: $47.67 (total return will be 35.4% in 46 months but 67.6% with the previous four calls since the position was added)

3. The stock price closes below but near our $160.00 strike price.

Call premium: $10.00

Dividends: $12.32

Total: $22.32 (total income of 16.6% in 46 months and 48.8% with the previous calls)

4. The stock price declines.

There will be $22.32 in income to offset the decline. Plus, the original purchase price is $25 per share below the strike price.

Portfolio Recap

AbbVie Inc. (ABBV)

Yield: 3.6%

The future looks good for this life science and biotech company. AbbVie is turning the corner from the Humira expiration as new drugs Skyrizi and Rinvoq are expected to generate $19 billion this year, replacing nearly all the peak Humira revenue alone. The company returned to slow revenue growth in the second half of 2024 and is expected to generate “robust” growth this year. There are also several drugs that should receive FDA approval this year. ABBV returned a respectable 15% in 2024, but 2025 should be much better as greener pasters are finally arriving. BUY

AGNC Investment Corp. (AGNC)

Yield: 15.2%

This mortgage REIT is coming off a rough period of inflation and rising interest rates. The storm is over. Although AGNC is not moving meaningfully higher, it has traded relatively flat for most of the last two years. It also held up okay despite the deterioration of the interest rate narrative in the last few months. It should be poised ahead of much better times as interest rates have likely peaked and should trend lower from here over the next year. But even sideways price performance isn’t bad as the massive yield alone provides a good return. BUY

Ally Financial Inc. (ALLY)

Yield: 3.4%

Financial stocks gave back most of the robust post-election gains in December as investors changed their tune and started worrying about higher rates for longer. But next year looks very good for the sector. Short-term interest rates will move lower, the economy is expected to be solid, and the regulatory environment will be much better. Unlike many of its peers, ALLY is still cheaply valued ahead of better times. It is the nation’s leading online bank and it is well positioned in the high-growth area of a promising sector. Analysts are expecting earnings growth of 40% in 2025. ALLY’s spike may still be ahead. BUY

Cheniere Energy Partners, L.P. (CQP)

Yield: 6.2%

The price of this liquid natural gas exporting partnership had been on fire in November as the election promised a better regulatory environment. But it was a different story in December as markets sobered up and CQP gave back more than half of those recent gains. CQP is still up over 13% since the election and the future still looks good. The next administration is highly encouraging of natural gas exports and Cheniere is the country’s largest exporter. The longer-term situation was always strong as the rest of the world desperately needs U.S. natural gas. Now, the short-term situation is improving. (This security generates a K1 form at tax time.) BUY

Constellation Energy Corporation (CEG)

Yield: 0.6%

It was a big week for Constellation. The nation’s largest nuclear energy producer was awarded more than $1 billion in contracts to provide 13 government agencies with electricity beginning this year. The contract is the largest of its kind ever and underscores the desirability of carbon-free electric power that is in high demand as electricity use skyrockets from AI. CEG soared over 13% in just two days since the announcement of the contract. Tech companies must secure power sources for the massive energy demand of AI. Constellation is a prime candidate with dependable carbon-free power. The new administration will likely bring a friendlier regulatory environment, making more deals likely. HOLD

Enterprise Product Partners L.P. (EPD)

Yield: 6.6%

This high-yielding midstream energy partnership has regained its footing after a steep early December selloff following a huge post-election surge. Despite all the bouncing around, EPD is still up 9% since the election. And the future is still bright. There should be more oil and gas sloshing around the country in the years ahead. And EPD can move higher. The stock is still well below the all-time high set in 2014. And now earnings are much higher. However, the position is likely to be called ten days from now when the calls expire. (This security generates a K1 form at tax time.) HOLD

Rating change – “HOLD” to “BUY”

NextEra Energy, Inc. (NEE)

Yield: 2.8%

This is a great stock to own right now. It’s cheap and well positioned as interest rates have peaked and electricity demand is booming. NEE was a superstar stock until 2022 when inflation and rising interest rates kicked in. But it recovered in 2024 and returned about 20%. The recent souring of the interest rate narrative has likely run its course along with the downside for NEE. It is upgraded to a “BUY.”

The recent volatility is from the macro environment and not the internal operations of the company. The regulated and clean energy utility is doing great. NextEra expects to deliver 10% average earnings and dividend growth over the next several years, and it has a long track record of successfully delivering. The utility also stands to benefit from the increased electricity demand from AI and data centers. BUY

Qualcomm Corp. (QCOM)

Yield: 2.1%

QCOM rallied on Friday and Monday, along with most other technology stocks, as AI growth has come front and center after bullish statements issued by Nvidia (NVDA). But QCOM fell back in the summer and has been basically stuck in the mud since. It’s way below the June high and still the same price it was last February. But we have sold four calls on the stock and ratcheted up the return despite the recent lack of appreciation.

It’s worth being patient because when this stock moves it easily makes up for lost time. And it will take off at some point. The market wants to see strong U.S. smartphone sales from an AI upgrade cycle. But that doesn’t appear to be happening yet, although analysts think it is a strong possibility sometime this year. BUY

Realty Income Corp. (O)

Yield: 6.0%

The legendary monthly income REIT has tumbled back to near the yearly lows after riding high for a while in the summer and fall. Although it 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 a bad thing. The hope of significantly lower interest rates fell apart in the fall. Since then, O has fallen about 20% from the mid-October high. But the prognosis is still good. The Fed has begun a rate-cutting cycle that will likely last for the next two years. Longer-term rates have likely peaked and there is a chance they will trend lower in the year ahead. HOLD

Toll Brothers, Inc. (TOL)

Yield: 0.6%

The luxury homebuilder stock has fallen 26% from the late November high. In addition to the overall market rolling over in December, there was some bad news on the home-buying front. There are industry-wide affordability concerns, and mortgage rates have risen back near the highs. But Toll Brother’s results are still stellar as luxury homes are somewhat insulated from the trends.

Earnings beat expectations with revenues up 10.3% and earnings up 12.6% over last year’s quarter. Toll Brothers also reported that unit sales were up a whopping 25% for the full year versus 2023. The news is also improving. Pending home sales were up for the fourth straight month in November and increased 6.9% over the past year. TOL will bounce around with the housing market news in the near term, but the longer-term trends are strong. BUY

Existing Call Trades

Sell EPD Jan 17th $29.00 calls at $1.75 or better

We sold the calls near the high. But EPD took off to unprecedented levels since. It soared 22% in November. The stock did pull back in December but it’s still well above the strike price at over 32 per share with just ten days left before the calls expire. It is likely to be called. But we secured a strong income and total return in a short time. We can also add more midstream companies to the portfolio in the future.

Current Recommendations

Open RecommendationsTicker SymbolEntry DateEntry PriceRecent PriceBuy at or Under PriceYieldTotal Return
AbbVie Inc.ABBV12/17/24$175.38$181.22$200.003.62%3.33%
AGNC Investment CorpAGNC9/24/24$10.47$9.44$12.0015.25%-5.26%
Ally Financial Inc.ALLY11/26/24$39.42$35.85$45.003.35%-9.06%
Cheniere Energy Prtns.CQP7/23/24$53.04$55.46$60.006.25%7.09%
Constellation Energy Corp.CEG8/27/24$196.14$252.40$270.000.60%28.89%
Enterprise Product Ptnrs.EPD2/27/24$27.61$31.83$30.006.60%21.68%
NextEra Energy, Inc.NEE4/25/23$77.50$71.99NA2.86%-2.71%
Qualcomm Inc. QCOM5/5/21$134.65$157.83$180.002.15%27.05%
Realty Income Corp.O6/27/23$60.19$53.28NA5.95%-3.25%
Toll Brothers, Inc.TOL10/22/24$148.02$126.23$170.000.60%-14.72%
Open RecommendationsTicker SymbolIntial ActionEntry DateEntry PriceRecent Price Sell To Price or betterTotal Return
EPD Jan 17 $29 callEPD250117C00029000Sell 11/12/24$1.75$2.95$1.756.34%
CEG Mar 21 $260CEG250321C00260000Sell Pending$20.20$20.0010.20%
QCOM Mar 21 $10 callQCOM250321C00160000Sell Pending$10.10$10.007.43%
as of close on 1/03/2025

SOLD STOCKS

xTicker Symbol ActionEntry DateEntry PriceSale DateSale PriceTotal Return
Innovative Industrial Props.IIPRCalled6/2/20$87.829/18/20$100.0015.08%
QualcommQCOMCalled6/24/20$89.149/18/20$95.007.30%
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$23.214/14.2022$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//2023$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%
Marathon Petroleum Corp. MPCCalled10/24/23$149.453/28/24$16512.06%
The Williams Companies, Inc.WMBCalled8/24/22$35.585/17/24$357.14%
Main Street Capital Corp.MAINCalled3/26/24$46.409/20/24$4910.91%
Brookfield Infrastructure Cp.BIPCCalled2/27/24$32.649/20/24$3511.00%
American Tower Corp.AMTCalled1/23/24$202.269/20/24$2105.43%
ONEOK, Inc.OKECalled8/27/24$79.5910/18/24$8811.18%
Alexandria Real Estate Eq.ARESold12/19/23$129.5411/19/24$108-12.82%
FS KKR Capital Corp.FSKCalled4/23/24$19.4212/20/24$2014.06%
EXPIRED OPTIONS
SecurityIn/out moneySell DateSell PriceExp. Date$ 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-money9/1/2021$2.0010/15/21$2.003.95%
USB Nov 19 $60 callout-of-money9/24.2021$2.3011/19.2021$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-money7/20.2022$11.759/16/22$11.758.73%
V Mar 17th $220 callout-of-money1/24/23$12.003/17/203$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%
MPC $165 Mar 28th callin-the-money2/14/23$10.003/28/24106.69%
QCOM $170 Apr 26th callout-of-money3/12/24$10.004/26/24107.42%
WMB $35 May 17th callin-the-money3/12/24$2.005/17/2425.62%
QCOM $200 July 19th callout-of-money6/5/24$12.007/19/24128.91%
MAIN $49.4 Sep 20th Callin-the-money6/27/24$2.009/20/2424.31%
BIPC $35 Sep 20th Callin-the-money7/16/24$3.009/20/2439.19%
AMT Sep 20 $210 callin-the-money7/30/24$15.009/20/24157.42%
OKE Oct 18 $87.50 callin-the-money8/27/24$3.5010/18/243.54.40%
FSK Dec 20 $20 callin-the-money10/25/24$0.9512/20/250.954.89%
CEG Dec 29 $260 callout-of-money9/25/24$24.0012/20/242412.24%


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