McDonald’s Corp (NYSE: MCD) is continuing its bullish turnaround. Following last week’s earnings, I believe the company has at least an additional 12-24 months of superior returns ahead.
The new coffee offerings will surely keep the positive PR coming as McDonald’s starts throwing that hefty marketing budget behind their java. Moreover, international expansion and sales are benefiting nicely from increasing demand and a weaker dollar. Lastly, as the US consumer looks for ways to prune spending, say goodbye to Applebee’s (Nasdaq: APPB) and hello to McDonald’s dollar menu (you don’t think people will actually cook, do you?).
However, the easy money has been made. Thus, to juice returns I recommend snapping up deep in-the-money calls. Options are a risky way to bet on equities, but I believe a fairly conservative strategy is purchasing deep in the money calls for blue chip stocks that are doing well. For example, you can purchase the March 08 45 MCD calls for a 20-30 cent premium.
So long as MCD can get to 60 by the strike date, you will have a 15+% return versus a 3.5% return. Not a bad way to beat the market over the next 5 months.
Plan: Buy MCD March ‘08 45 Calls around 13
Disclosure: SmartGuyDH owns MCD call options