Talking Up McDonalds Stock Brings Profit Opportunities – Mar 12 2014

McDonald’s stock has been in my portfolio for years. It is the giant fast food empire that over the past ten years has continued to open more restaurants and spread to new markets with a growing concentration in Asia. While McDonald’s empire has grown so has my portfolio as the stock has done incredibly well. It has now doubled from the low of October 2008 when it hit $45.79. The overall chart of McDonald’s over the past 10 years shows why this stock has stayed in my Put Selling portfolio.

McDonalds Stock 10 Year Weekly Chart

Over the past ten years the stock has moved from below $30.00 to just over $100 in value. The bear market of 2008 to 2009 was truly just an opportunity for investors to buy more shares or trade the options. Over that same period the accumulation of shares has been steady and relentless. Week after week more shares have been accumulated by investors with the majority being bought by pensions and large institutional investors. It is the chart below that has made my Put Selling trades so profitable. There is nothing easier than selling puts against a stock that is in a long-term uptrend. The easiest part about Put Selling a stock like McDonalds Stock is knowing that if I sold puts at the wrong time and the stock fell and I was assigned shares, the trade would still end profitably as any number of rescue strategies could be applied to the trade. These are the types of stocks to consider using the “Wealth Building Strategy” or the many moving averages strategies against.

McDonalds Stock 10 Year Weekly Chart to March 12 2014

The Wealth Building Strategy for McDonalds Stock

The wealth building strategy is a system designed around selling covered calls to generate income and capital gains. The strategy is fully laid out in this lengthy article. For McDonalds Stock buy and hold investors it would be worthwhile reading the article and considering applying the wealth building strategy to McDonalds Stock. It truly is the type of stock that can assist in building fortunes that are handed down to other family members.

McDonalds Stock Outlook

I mention the wealth building strategy because yesterday saw a somewhat unusual event with McDonalds CFO Pete Bensen talking up the company and its earnings outlook yesterday at the 2014 Consumer and Retail Conference. He spoke just a day after disappointing stats came out from McDonalds regarding their continuing problems and generating more revenue and increasing the numbers of products being sold even with the promotional dropping of prices on some items like the $5 chicken McNuggets recently.

Expansion Slowing

When a company expands into new markets there is often a boost in earnings. McDonalds experienced this over the past decade as it expanded into Asia, Africa and other European countries. But as the expansion slows so do sales figures. The day before Bensen talked up the company prospects, McDonalds reported a 0.3% decline of global comparable-store sales for February that was above estimates of 0.1%. While this figure may seem small, it is actually a trend that is being formed and that’s what concerns investors and obviously the company. What investors also focused on was that same-restaurant sales in the US fell 1.4% which was more than double analysts average estimates of a 0.6% decline. This is not the first such month of declines and McDonalds is beginning to show an erosion of strength at the core of its business, namely the USA.

Talking Up The Stock

All of this will impact the stock. Bensen meanwhile spoke about how the company is focusing on “stabilizing” performance in the key economies of US, Japan and Germany. He also spoke about the company returning $5 billion to shareholders in 2014. When a company begins to talk up its own stock you know they are concerned about being able to maintain a level of expanding earnings.

This talking up of a company’s stock often opens up profit-making opportunities for investors and in the case of McDonalds Stock there are quite a few. Let’s take a look.

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Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.