Just over the past week, the coronavirus has spread, the Iowa caucuses have occurred, the Kansas City Chiefs have won the Super Bowl, and President Trump has been acquitted by the Senate.
Really, that’s all anyone is talking about right now. It seems that every time I pick up my phone, open my computer, or turn on the TV, I have a one-in-five chance of guessing exactly what the talking heads are going to be going on about.
Before your eyes glaze over, listen up – I’m here to tell you about something different.
Because soon enough, the coronavirus will be contained. A democratic presidential nominee will emerge. The Super Bowl will come around again next February. And the impeachment trial will end – in fact, it already has.
There are other stories hiding beneath the wreckage of political news – and it’s in those stories where the real profit potential lies.
In fact, on Tuesday, a major restaurant chain made a move that could affect the business for years and years to come. And this long-term change could hand you some serious cash.
Breakfast Isn’t Just the Most Important Meal of the Day
On Tuesday, February 4, fast food chain Wendy’s Co. (NASDAQ: WEN) tweeted at its biggest competitor.
“Hey @McDonalds, roast us.”
Immediately following the jab, WEN made an official announcement – on March 2, the chicken and burger restaurant will start serving breakfast worldwide.
Now, we know just how effective a Twitter war can be as an advertising ploy. Remember Popeyes and Chick-fil-A? Their social media spat sparked a fried chicken battle like the nation’s never seen before.
This time around, the matter at hand isn’t fried chicken. It’s breakfast.
Starting this quarter, WEN will serve nine different breakfast sandwiches, including a Honey Butter Chicken Biscuit and a “Breakfast Baconator,” along with a selection of coffee drinks, like their “Frosty-ccino.”
There’s no denying that consumers worldwide are turning to healthier options. That much is evident in the rise of companies like Beyond Meat Inc. (NASDAQ: BYND) and the fall of those like Kraft-Heinz Co. (NASDAQ: KHC). But WEN refuses to be left behind, which is exactly why the company is turning to the early-morning hours (starting at 6:30 AM, to be exact) for their next success.
Market research company The NPD Group has found that breakfast is the only restaurant daypart with year-over-year growth. For other meals, consumers are cooking at home or focusing on healthier alternatives… but it seems people just can’t get away from their traditional bacon and eggs.
I don’t blame them. They say breakfast is the most important meal of the day, after all. I could never say no to a sausage egg and cheese sandwich – and the “ccino” part of Wendy’s new Frosty makes it okay to drink a milkshake at 8AM… right?
Just reading about Wendy’s new options makes my mouth water, even if I know the pictures may not be exact replicas of what I’d be served in the drive-thru. Still, WEN’s U.S. President Kurt Kane is confident. He said:
“Our crew will be hand-cracking fresh eggs on all our breakfast sandwiches and leaning into the quality ingredients that have long set Wendy’s apart from the competition.”
That “competition” he speaks of comes mainly from fast-food chains Burger King, Chick-fil-A, and the big guy – McDonald’s Corp. (NYSE: MCD), the largest fast-food chain in the world.
See, this isn’t WEN’s first attempt at breakfast. In fact, it’s the company’s fifth. Its most recent attempt was in 2010, when it rolled out breakfast in six different cities across the U.S. But the selective market made advertising difficult. Restaurants like MCD were able to counter their gains, over-advertising and slashing prices in those markets while WEN’s sales came in below breakeven, forcing the company to discontinue the venture.
This time, however, WEN is investing $20 million and hiring 200,000 new employees to help execute the plan. Things will be different than the company’s previous attempts – especially if CEO Todd Penegor has anything to say about it. “We’re in a much different position as a brand,” he says.
Truthfully, he isn’t wrong. Over the past 12 months, MCD shares are up 21%. WEN’s are up 27%! WEN also reported a strong third quarter, with a 10% rise in revenues and a raise in full-year outlook for global system-wide sales. And WEN anticipates breakfast sales will end up growing to encompass at least 10% of total sales, so those numbers have room to grow in the future.
Now, this is a plan that has the potential to help WEN over the long term. The company expects to incur losses after the first year – but after that, it plans to become profitable on breakfast in 2021 and 2022. It’s a three-year plan that proves the restaurant’s commitment to the breakfast game.
Usually, I’m a fan of short-term options that’ll yield profits in under a month. But if you want to make a profit on WEN’s breakfast venture, you need to look a little further ahead. That’s why I’d suggest Long-Term Equity Anticipation Securities, or LEAPs.
LEAPs are just like your typical option play, but their expiration dates are over a year away. That way, you have time to wait for WEN’s breakfast business to turn profitable – and then, you can take home profits too!
Now, before I go, I want to hear from YOU! What are your favorite trading strategies? Do you have any questions about how to trade LEAPs? What else do you want to learn about trading? Click here now to submit a message to my mailbag.
Have a great weekend,
America’s #1 Pattern Trader