Invest In Companies Increasing Their Efficiency

The economy can grow in several ways. One of the key ways of growth is productivity growth. The rise of the internet in the 1990s led to a boom in productivity, as many office tasks moved onto computers and away from less efficient means.

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  • A new boom is underway today with the rise of AI technology and automation. These new tools can make a process more efficient, and reward companies with higher profit margins and better operational results.

    One form of automation is in food preparation. Restaurant Chipotle Mexican Grill (CMG) is working on pushing out a line of robot chefs.

    That would allow for faster preparation of the company’s salads and bowls, which in turn could mean processing customers more quickly and with fewer missed orders.

    Chipotle grew earnings by 32 percent last year, and revenues rose by 13 percent. Profit margins are at 12 percent, already slightly higher than the fast food sector. Improved efficiency could drive profits higher, making the company more valuable.

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  • Action to take: Investors may like shares here, following a 15 percent pullback from the stock’s summer highs. Shares are pricey at over $1,800 each, but the company will likely continue to grow over time.

    For traders, the March 2024 $2,500 calls, last going for about $8.50, could see mid-double-digit returns in the months ahead, should the stock rebound and move higher in the coming months.

    The trade isn’t likely to move in-the-money, so don’t look to hold until expiration.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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