Veeral Khatri McDonalds MCD-N HOLD Dec 08, 2017

Their decision to extend their $5 meal beyond the summer was applauded by consumers and Wall Street alike as consumers are pushing back against higher prices. Smart.

MCD reported an E. coli outbreak from its quarter pounder burger across 10 US states. The outbreak started between late September and mid-October. MCD has temporarily stopped using certain ingredients in affected areas. The stock fell sharply the day following the news, and it is currently down 5% (an $11B market cap loss) from just prior to the news.  

We do not feel that the outbreak warrants an $11B loss to the stock, particularly over the long-term, but the stock has run up nicely over the past few months, and this could partially be profit-taking in conjunction with the news release. We would prefer to see the stock find a floor before entering a position, but over the long-term, we would be comfortable holding the name.
Unlock Premium - Try 5i Free  

It recovered a few dollars today after falling on the illnesses caused by the Quarter Pounder. We don't want that gain. Rather, we want upside on a good quarter--they report tomorrow. 

It was over bought to begin with before the recent difficulties. It is in a trading range so if it hit $260 or $270 he would buy it.

He trimmed it last year due to continued cost pressures and valuation. Is worried about sales growth stagnating and more competition.

They report Thursday. Restaurants have struggled because of high prices, but MCD rolled out some cheaper offerings and customers responded, he hopes.

Well managed. Super-competitive environment. Noted consumer weakness in US and globally. Great job adapting to changing environment over the last 30 years. Growth only about 5-7%. More expensive US mortgages have reduced disposable income.

He always says buy on dips. A machine, well-run by fine managers.

Was downgraded last Friday and today over fears they won't meet expectations this quarter, including disappointment over MCD's new chicken strips dish, that it won't turn things around. Rather, customer prefer heavily breaded chicken and the find these strips ugly. However, history says it has never paid to downgrade MCD. It's the king, offering good value and is highly well-run. The CEO will figure it out.

Ability to source domestically is quite high, so impact of tariffs would be neutral. Extremely well run. Very good at pivoting to whatever the customer wants. Keeps a close eye on it. Likes the business; valuation a bit high for pedestrian, yet predictable, growth.