It’s All About Passing on Higher Costs to Customers

Wealthy investors tend to see inflation as a friend, not an enemy. Rising prices tend to benefit assets like stocks and real estate over time.

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  • Owning companies that can pass on all, or nearly all, of inflation’s higher costs can fare even better over time. When inflation subsides, higher prices remain in place, leading to better profits for investors. While there may be some headwinds now, great companies can be had for a reasonable value.

    One such company is McDonald’s (MCD). The fast-food giant beat on its most recent earnings, thanks to the higher prices that customers are paying. While there’s still some concern over inflation, that fear led to shares dropping following their earnings beat, not rising.

    Action to take: Shares are a bit pricey at 25 times earnings, but are worth picking up on any pullback. McDonald’s managed to post a rally in 2022 while most stocks fell. Plus, shares pay a 2.2 percent dividend right now, with a long history of growth.

    For traders, the June $280 calls last going or about $6.60, offer mid-double-digit returns in the weeks ahead as the stock shakes off the small drop from its latest earnings report. Traders should look for a quick bounce to take profits, as shares tend to be slow moving.

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    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.