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Two Ways To Play: Mickey D's Cuts the Cheese


Strengthen your portfolio in good times and bad.

McDonald's (MCD) is making changes to its dollar menu and pretty soon, customers will be doling out more cash for a double cheeseburger.

According to Bloomberg, starting next month the company will increase the price of the double cheeseburger from $1 to $1.19 and the item will be taken off the dollar menu. In its place will be the new McDouble which will consist of two beef patties but just one slice of cheese, compared to two on the original sandwich.

Greg Watson, MCD's vice president of U.S. marketing said the price of cheese was "part of the driving factor." The company needed to strike a balance between keeping customers happy and keeping franchise operators financially sound. It felt this strategy was the best method, Watson said.

MCD's dollar menu accounts for 14% of all sales and helped the company beat third quarter profit expectations. Since national advertising of the dollar menu debuted in 2002, McDonald's stock has more than tripled in New York trading.

MCD shares closed +2.34% to $56.81 in today's session.

From the Bull Pen: McDonald's ability to raise prices on cash-strapped consumers is telling of its competitive advantage. It's a longer term play but sell stops can be set below $55.

From the Bear Cave: Those bearish can consider Chipotle Mexican Grill (CMG). One option is to enter a downside position on a rally to the $49-50 level with a tight buy stop above.
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No positions in stocks mentioned.

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