| Income Builder Model Portfolio |
|
| Monthly Portfolio Review: June 2026Publication date: July 6, 2026 |
|
| | | Current portfolio holdings |
|
|
| | FOR SUBSCRIBER USE ONLY. DO NOT FORWARD OR SHARE. |
|
| | | In June, investors rotated away from mega-caps and towards sectors outside Technology that have underperformed in recent months. The average Mag 7 stock declined approximately 10%, while the S&P 500 declined 1%. Oil prices fell sharply, pressuring Energy names, as the United States and Iran entered into a peace accord that reopened the Strait of Hormuz. Although falling energy prices should help the inflation outlook going forward, Kevin Warsh signaled caution on rate cuts in his debut as Fed Chair. The Income Builder portfolio declined 2.3% in June and has generated a total return of 10.2% through the first half of the year. While Warsh establishes credibility with his new Fed colleagues, we see upside potential from favorable inflation data as lower energy prices relieve cost pressures and support the case for lower rates.
|
|
| | |
The Income Builder portfolio generated a total return of -2.3% in June, versus the S&P 500 Index return of -1.0%. On a year to date basis through the end of the month, the portfolio has returned 10.2%, in-line with the 10.2% return of the S&P 500.
The top performing positions in the portfolio in June were Mid-America Apartment Communities (MAA), which returned 8%; WEC Energy Group (WEC), which returned 5%; and Williams (WMB), which returned 5%.
The worst performing positions in the portfolio this month were Crown Castle (CCI), which returned -16%; Strategy 8% Perpetual Preferred (STRK), which returned -14%; and Diamondback Energy (FANG), which returned -8%. |
|
|
Mega-cap tech slides
Following two very strong months, Technology stocks took a breather in June. Within the S&P 500, the Tech sector was actually flat, but this obscures more severe weakness among some of the largest capitalization tech names.
Every single mega-cap tech (or tech-adjacent) stock that we cover within our MAG7 MONITOR generated a negative return in June. The average Mag 7 stock declined 10%, contributing to a 2.8% decline in the NASDAQ Composite in June. |
|
|
| |
Semiconductor stocks offset much of this weakness, with High-Bandwidth Memory plays like Micron (MU) and Sandisk (SNDK) continuing to deliver strong upside. The VanEck Semiconductor ETF (SMH) advanced 9.7% in June, propelled by memory names.
Within Technology, investors rotated capital from the customers of these supply-constrained semiconductor players (such as the Mag 7 hyperscalers) to the suppliers themselves.
The SpaceX (SPCX) IPO on June 12, the biggest IPO in history, was also a likely headwind for mega-cap tech stocks. The eventual inclusion of SPCX in various indexes means fund managers need to sell down other positions to raise cash for SPCX allocations.
As investors pulled money from the largest cap names in June, the Communication Services sector, dominated by Amazon (AMZN) and Meta (META), was the worst performer.
By contrast, sectors that have underperformed Technology in recent months, notably Industrials, Health Care and Financials, did comparatively well. |
|
|
|
Energy stocks also lagged in June as oil prices declined with the mid-month signing of a Memorandum of Understanding (MOU) between the United States and Iran.
The agreement is a prelude to what is expected to be a longer lasting peace deal that, among other things, will keep the Strait of Hormuz open for commercial traffic.
The immediate impact on oil markets has been sharp. Spot prices for Brent Crude Oil approached $70 per barrel by the end of June. They began the month north of $90. |
|
|
|
Brent Crude Oil($/barrel - Last 12 Months) |
|
|
As we have noted in previous reports, futures markets in oil have, throughout the war, indicated much lower oil prices in the months and years ahead. Futures markets are now pricing in even lower oil prices, with implied expectations in the mid-$60s range one year from now. |
|
|
|
Crude Oil Futures Curve(Source: FactSet) |
|
|
Is the inflation threat gone?
One might have assumed that the peace deal with Iran and subsequent decline in oil prices would have had a meaningful impact on inflation expectations and, by extension, interest rates.
After all, it was the outbreak of hostilities in the Middle East and closure of the Strait of Hormuz that caused short-term interest rates, as reflected by the One-Year Treasury yield, to rise sharply earlier this year. Between February and May 2026, One-Year Treasury Yields rose approximately a quarter-point to approximately 3.8%.
With the Fed funds rate now in a 3.5% to 3.75% band, this upward move reflected a sense that at least one previously expected rate cut will not materialize in the year ahead, along with some potential for a rate hike. |
|
|
|
One-Year Treasury Yields—Last 12 Months(Source: FactSet) |
|
|
Yet even though oil prices are now close to where they were in February, short-term interest rate expectations have not budged. In fact, the One-Year Treasury yield advanced approximately 0.15% in June, as oil prices collapsed.
Warsh’s surprising hawkishness
The new Fed Chair Kevin Warsh oversaw his first Federal Open Market Committee (FOMC) meeting and held his debut press conference on June 17. Warsh was handpicked by President Trump, whose strong desire to see the Fed cut interest rates has been made abundantly clear.
Warsh was nominated in part because he conveyed a path to lower interest rates through his focus on tech-driven disinflation and his stated desire to dial back the Fed’s long-term bond positioning. Warsh believes that shrinking the Fed’s balance sheet may potentially put some upward pressure on long-term bond yields but frees the Fed’s hand to have lower short-term rates.
The bond market expected a dove. Yet rather than come out with a strong rate-cutting message, Warsh spoke about the need to bring inflation back to target levels.
He also presented himself as a consensus-builder who would work collaboratively with other Fed officials, many of whom are now talking about the possibility of even having to raise rates.
To be fair, the recent inflation data, published toward the end of June, gives Warsh little room to sound too dovish at the moment. Headline inflation moved back above 4% in May, largely because of the energy shock, while core inflation, excluding food and energy, remained well above the Fed’s 2% target at 3.4%.
Playing the long game
Warsh may still be keen to bring interest rates down, but he needs to bring the other voting members of the FOMC onboard. Coming out too aggressively could undermine his ability to lead the Fed in that direction.
He also likely saw no need to make enemies during his first few weeks on the job by taking a belligerent attitude toward incumbent Fed Governors. He spoke positively about them during the press conference.
Warsh has consistently emphasized that the Fed under his leadership will be data-dependent. With inflation still elevated, the data does not currently support an aggressive dovish pivot.
But with oil prices headed sharply down, the data should soon follow. This will leave Warsh in a stronger position to advocate for lower rates as the impact of lower energy prices becomes reflected in consumer price readings going forward.
Even Trump seems content with the situation, noting that Warsh “has to do what he has to do” to overcome Fed board members who are “a little bit hostile.”
Stubbornly high interest rates remain a headwind for both the stock market and the economy but also a source of untapped upside. With oil now close to pre-Epic Fury levels, we may see the macro picture develop in a favorable way over the rest of the year. |
|
| | | The top performing positions within the portfolio in June were Mid-America Apartment Communities (MAA), which returned 8%; WEC Energy Group (WEC), which returned 5%; and Williams (WMB), which returned 5%.
The worst performing positions were Crown Castle (CCI), which returned -16%; Strategy 8% Perpetual Preferred (STRK), which returned -14%; and Diamondback Energy (FANG), which returned -8%.
|
|
| |
Shares of MAA saw upside this month as the market began to look through near-term Sunbelt apartment supply pressure and focus on improving fundamentals, attractive valuation, and the company’s strong balance sheet.
MAA is one of the largest apartment REITs in the United States, with a portfolio concentrated in Sunbelt and Southeast markets. These markets have been pressured by elevated new apartment supply, but they also continue to benefit from long-term population growth, household formation, job growth, and migration trends.
The key issue for MAA has been timing. New supply has weighed on rent growth, especially in Sunbelt markets, but recent data suggest the worst of the pressure may be starting to ease.
In the first quarter, MAA reported five consecutive quarters of improving year-over-year blended rent performance, with absorption outpacing deliveries and renewal pricing strengthening. Resident retention also remained very strong, with trailing twelve-month turnover at a record low.
MAA also benefited from its balance sheet and capital allocation flexibility. The company has low leverage and continued to repurchase shares earlier in the year.
MAA offers a combination of current income (approximately 4.5% dividend yield), balance sheet strength, and eventual recovery in Sunbelt apartment fundamentals. The stock does not require an immediate boom in rents to work. It needs evidence that supply pressure is peaking, demand remains healthy, and rent growth can gradually improve into 2027. |
|
| | WEC advanced in June as investors continued to reward utilities that can combine defensive earnings with visible long-term growth tied to electricity demand, data centers, industrial development, and grid investment.
WEC has historically been viewed as a high-quality defensive utility, but the investment case is increasingly tied to rising power demand in Wisconsin.
A major reason for the stock’s strength was growing confidence that WEC may be able to strengthen and extend its earnings growth outlook when it updates its capital plan in the third quarter.
The data center angle is becoming more important. WEC sees a potential 4 to 5 gigawatts of additional data center load tied to the Microsoft and Vantage sites. That is a very large opportunity for a regulated utility, because incremental load growth can support new generation, transmission, and distribution investment.
Management also pointed to traditional industrial investment in Wisconsin, including manufacturing expansion, corporate relocation activity, and residential housing development. This supports the idea that WEC’s service territory may be entering a stronger load-growth period than utilities have experienced for much of the past decade. |
|
| |
Despite significant energy sector weakness, WMB performed well in June as investors continued to recognize the strategic value of natural gas infrastructure in a power-constrained economy.
One the largest U.S. natural gas infrastructure companies, the investment case continued to broaden in June.
WMB is increasingly viewed not just as a traditional midstream company, but as an infrastructure beneficiary of AI-driven power demand. The company is working on “behind-the-meter” power solutions for hyperscale data centers, where access to gas, turbines, siting, and execution speed can be major competitive advantages.
Management commentary during the month reinforced the idea that WMB may have many years of visible growth ahead, driven by data center power needs, utility demand, storage expansion, and Liquefied Natural Gas (LNG) exports. The company is also exploring creative financing structures that could help fund growth projects without putting excessive pressure on the balance sheet.
Late in the month, reports indicated that WMB was in advanced talks to acquire Momentum Midstream, a private natural gas infrastructure company with a significant Haynesville Shale footprint. If completed, the transaction would strengthen WMB’s position in one of the most important gas supply basins serving Gulf Coast LNG exports, industrial demand, and power generation. |
|
| |
CCI traded poorly in June as investors remained concerned about soft U.S. wireless carrier capital spending, the company’s transition after the sale of its Fiber and Small Cell businesses, and the timing of a return to stronger tower leasing growth.
CCI owns, operates, and leases shared communications infrastructure, anchored by a portfolio of roughly 40,000 towers across the United States. With the Fiber and Small Cell divestiture now closed, CCI has become a cleaner, U.S.-only tower company, giving investors a more straightforward way to gain exposure to wireless infrastructure.
CCI should see improving organic leasing and free cash flow growth in 2027, helped by master lease agreements, carrier network investment needs, and the eventual deployment of new spectrum.
But investors appear to be focused more on the gap between now and that 2027 inflection. The U.S. wireless industry is currently between major investment cycles, with 5G spending past its peak and 6G still ahead. That leaves CCI exposed to a period of softer carrier capex and limited near-term organic growth.
The dividend yield, now above 6%, is attractive, but the market may still want more evidence that cash flow growth can recover and that the payout is on a firmer footing.
The positive side is that CCI now has a clearer self-help story. Importantly, there may also be longer-term optionality from edge computing as AI inference creates demand for more localized compute capacity near tower sites, a growth avenue that does not appear to be priced in at all. |
|
| | Strategy (MSTR), the Bitcoin Treasury Company founded by Michael Saylor, came under severe selling pressure in June as Bitcoin declined. Notably, investors dumped the shares of the company’s most widely owned preferred stock security, the variable dividend instrument that goes by the ticker STRC.
The intention of the company is for STRC to trade very close to its $100 par value, but Strategy lacks a direct mechanism to sustain the price. As STRC began to depart from the targeted $99-$100 level, this led to some panic selling (and possibly even some targeted short-selling).
STRC is widely owned by retail investors, who may have had more confidence in the company’s ability to hold the par value than they should have.
STRK, which is held within the Income Builder, is different from STRC. Among other things, it has a fixed dividend of $2 per quarter, along with a permanent conversion right into common equity. But STRK came under pressure in June as the other securities within the Strategy complex deteriorated.
The company has taken various steps to solidify the balance sheet and restore investor confidence in the aftermath of this crisis in confidence. So far, it has worked. STRC had fallen as low as $71 towards the end of June, and as we write, is trading above $90. STRK is recovering as well in the first few trading day of July.
Among the steps the company took at the end of June to address the situation, they have increased their dollar cash holdings to more than $2.5 billion and authorized repurchase programs for both their common stock and preferred stock.
We continue to have long-term confidence in the STRK investment proposition, which is fundamentally based on the relationship between the value of the Bitcoin on the company’s balance sheet and its credit obligations.
The company estimates that at the current value of Bitcoin, it can cover its various dividends for approximately 30 years. If Bitcoin appreciates at an annual rate of 3%, this would hypothetically represent enough of a capital cushion that would allow Strategy to pay the current dividend obligations forever.
With a more cautious approach to balance sheet liquidity now being followed and investor expectations reset, it is possible that Strategy will emerge from this stress test in a stronger position than when it entered. |
|
| | FANG declined in June as the sharp reversal in oil prices weighed on exploration and production stocks.
FANG is one of the leading independent oil and gas producers in the Permian Basin, with a large acreage position, low-cost inventory, and a long track record of disciplined capital allocation. The stock remains sensitive to oil prices, but the company’s underlying operating story remains strong.
At an investor conference held in June, management indicated that bringing on incremental oil volumes would be free-cash-flow positive with crude oil prices as low as $60 per barrel. Even after the oil price pullback, FANG’s asset base appears capable of funding modest growth while still generating free cash flow.
The company also continues to expand its long-term opportunity set.
One interesting development is its potential role in West Texas power and data center infrastructure. Management believes the company could be an attractive partner for co-located power and data center projects because of its large surface footprint, access to abundant natural gas, and potential project-financing structures. |
|
| | | |
| | |
| | |
| | | |
|
| | Digital Realty Trust (DLR) |
|
|
|
| | |
|
| | |
|
| | |
|
| | |
|
| | |
|
| | Diamondback Energy (FANG) |
|
|
|
| | |
|
| | Mid-America Apartment (MAA) |
|
|
|
| | |
|
| | |
|
| | |
|
| | Strategy 8% Perpetual Pref (STRK) |
|
|
|
| | |
|
| | The 76research Income Builder Model Portfolio is intended for income-oriented investors and managed to generate an overall yield that is materially higher than broad equity indices. The portfolio includes stocks with above average dividend yields from a cross section of industries. While investments are screened for their income and income growth characteristics, specific holdings are chosen based on valuation and general business quality, growth and risk considerations. |
|
| | FOR SUBSCRIBER USE ONLY. DO NOT FORWARD OR SHARE. |
|
| | | |
|
|
|
|
|
