If You Can't Beat 'Em, Profit From This Corporate Secret By Sean Michael Cummings, analyst, True Wealth
Let's say your family of four wants to enjoy a weekend at Disney World. You pick one of the cheapest hotels in the Magic Kingdom. All you want is a basic room, and the ability to visit more than one park in a day. You'll end up paying $2,955.86 for the privilege. A four-person trip to Paris would cost only $700 more... And that includes the flight. Inflation is already killing consumers' wallets. But on top of that, it seems like the Mouse is finding any edge it can to keep sales growing. This trend isn't going away anytime soon. But instead of letting inflation win, you can profit from this corporate secret...
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As one viral Reddit post from October put it, "Disney World has always been expensive – but this is just insulting." Another from February noted, "For a $150 a night campsite, we also had to pay for ice... Walt is spinning in his grave." It's true. Disney World has never been cheap. But these folks aren't wrong about the inflation gripping the Magic Kingdom. Take the Art of Animation Resort, one of Disney's "value" offerings. Since 2019, the rate of a single-night weekend stay has ballooned 30%. That roughly triples U.S. inflation for the same period. Of course, prices are rising all over the country today. Hundreds of food items have seen price hikes to start off the new year, ranging from a few cents to $2 or more. With inflation at a new 40-year high, Disney's cash grabs may feel extreme... But it makes sense for the company's bottom line. And Disney isn't alone. Corporate America's profit margins were around 11% pre-pandemic. Now, they're around 13%. Despite record inflation and weakened consumer purchasing power, corporate profits are at all-time highs. The reason for this is simple... Corporations will never take a financial hit that they can push along to customers. It's called "pricing power." And sure, it's cynical. But that's why the world's strongest businesses are able to come out stronger, even in times of crisis. The first quarter of 2022 was Disney's second-best quarter of all time. That was during the Omicron surge, when more folks were staying home... Yet according to Disney CEO Bob Chapek, "[Disney World and Disney Land's] stellar performance was achieved at lower attendance levels than in 2019." The fall in attendance didn't matter to Disney. It had the pricing power to survive – and even conquer... Disney Parks, Experiences, and Products revenues for the quarter surged to $7.2 billion... double the same quarter a year ago. The segment's sales even came close to the $7.4 billion it brought in during the first quarter of 2019. Disney is just one example of the corporate world's ability to win – and keep winning. It will take much more than a few scathing reviews to reverse this trend. And that's where the opportunity comes in for investors... The current price of Disney's stock is nothing compared to the price of its hotels. If you love a company and expect it to do well, buy its equity. None of us like it when our favorite brands hike prices. But by becoming shareholders, we can lessen the pain... and profit along the way. Good investing, Sean Michael Cummings Further Reading Even some of the biggest, strongest companies have seen their share prices plummet this year. As contrarian investors, that's great news for us. And it's giving us a great opportunity today... Get the full story here. The end of the Melt Up is a difficult time to be a long-term investor. That's why Jeff Havenstein put together a list of the best qualities to look for in a long-term investment... Read more here: How to Find the Perfect Stock to Own for the Long Term. |
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DailyWealth Premium How to dodge the easiest mistake in investing... The reasons to buy stocks today are overwhelmingly numerous. And every investor should learn to avoid this fatal trap... Click here to get immediate access. Market Notes HIGHS AND LOWS NEW HIGHS OF NOTE LAST WEEK W.R. Berkley (WRB)... insurance
Royal Gold (RGLD)... gold royalties
Franco-Nevada (FNV)... gold royalties
Wheaton Precious Metals (WPM)... precious metals
Rayonier (RYN)... timberland
Mosaic (MOS)... fertilizer
Hormel Foods (HRL)... food products
Dollar Tree (DLTR)... discount retailer NEW LOWS OF NOTE LAST WEEK Biogen (BIIB)... pharmaceuticals
JPMorgan Chase (JPM)... financial giant
JD.com (JD)... "China's Amazon"
Alibaba (BABA)... Chinese e-commerce platform
DocuSign (DOCU)... Software as a Service
VMware (VMW)... cloud computing
Match Group (MTCH)... online dating
Starbucks (SBUX)... coffee "World Dominator"
Unilever (UL)... household brands
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