Many companies hire as they need to when growing like gangbusters. But when things go down, it’s a time to assess the size of a company and its needs, no matter what sector it’s in.
For some companies, the worst bloat can come from its executive offices. The growth of middle management can cause a big payroll expense to build up, and take away capital from lower-level workers that make a company’s success possible.
That’s why a number of big-name, labor-intensive companies have announced cuts in the past few months. One of the latest, McDonald’s (MCD), even temporarily closed corporate offices so that it could communicate decisions remotely.
These are the kinds of layoffs that can save big on expenses, and they won’t impact the fast-food giant at the store level. Shares hit an all-time high on the news. While a bit pricey at 25 times earnings, the company has held up well in a slowing economy, and even gained 13 percent in the past year.
Action to take: Investors may want to buy shares on any pullback from their all-time highs and build a long-term position in the industry leader. At present, shares yield about 2.2 percent, but on a selloff the payout can be much higher.
For traders, shares are likely to continue to trend higher. The June $295 calls, last going for about $3.95, offer mid-double-digit returns in the coming months.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.