McDonalds (MCD)

It is one of the few fast food companies that continue to do well. They are growing their bottom line earnings pretty quickly for what they are doing. This management knows how to adapt to the changing demographics. It is one of the few that will continue to do well and it is global.

Sell McDonald’s (MCD-N) and buy Restaurant Brands (QSR-T)? This is not a bad idea as Restaurant Brands has more of a growth runway. McDonald’s is more of a mature business with penetration pretty much everywhere.

This is up about 22% in the last 12 months, because they are trying to take advantage of technology to start to manage stores. Where they are now in bricks and mortar, they are going to get a huge amount of store growth. They are trying to maximize their ability to keep costs down. That is never the greatest idea to run a business. This is not expanding your revenues, it’s just keeping costs down.

This has done an amazing job morphing its business. Coffee is the new growth area, which is very high margin. They have gotten good locations and understand the real estate game. If there were a big pull back, this is the kind of thing he would look at.

It has implemented the ‘Internet of Things’. You can order without people. They are getting great margins. He would be a buyer on a pullback. It is at a record high on a 20 year chart.

Sold his holdings, but still likes it and is hoping to get back in. The company needed to reinvent itself, and did that by providing a 24-hour a day McDonald’s. The new CEO has done some great things by refranchising stores with a focus on technology. Trading at around 23X PE, which is not expensive given the good things that are going on. A low beta stock, and you need some of those in a portfolio. In a bad market, these are the names that hold up. Dividend yield of 2.6%.

A perfectly good long term holding. It had a recent pop and if you had a lot of profits she would recommend taking some off the table. You expect it to grow in the US with GDP. Internationally there is still room for them to grow further. She thinks they are doing everything right. but it is a rich stock right now.

(A Top Pick Jan 29/16. Up 8%.) The idea was that this was trading at such low levels. He started buying at about $100. The company needed to go through a transformation, and he had confidence they were going to do that. Sold his holdings. A lot of the easy money has been made and it is trading at fair value now.

(Market Call Minute.) If you are going to look at a quick service company, this is probably the one to look at.

It has done very well. But she prefers Yum Brands in that space. She holds both the companies after YUM split. MCD-N has brought in some growth with menu innovation. They have room to grow outside of the US, but YUM China is a more direct play. MCD-N is probably fairly valued.

(A Top Pick Jan 19/16. Up 7.71%.) He would own this today, but prefers more economically sensitive sectors now.

Starbucks (SBUX-Q) or McDonald’s (MCD-N)? He likes both. Has held this in the past, but sold it about a year ago, primarily because he felt he had capitalized on the 1^st leg of the recovery. The share price has retracted since then, and he is taking a very close look at it and possibly stepping in again. This has a better yield and a better price to earnings ratio.

The numbers going to fast food restaurants is going down. All the McDonald’s are being automated. By taking people out, their labour costs are going down. It has probably had too much of a run for him and not enough dividend. He wouldn’t invest in this, but wouldn’t discourage people who want to. Dividend yield of 3.1%.

They’ve decided breakfast works, so they are going to make all day breakfasts. He is wondering why the market is rewarding them so fully for that. It is not a cheap valuation, so he would pass on this, until they come up with something that brings in more people.

The fast food restaurant industry is very competitive. This stock has been struggling lately, which was partly on changing tastes in the US, and on diminishing returns. These companies sometimes get growth on product cycles, and they got them for a while on global expansion, but this is a very mature fast food company that exists globally now. They might have a few more places to expand, but fundamentally their business growth should be tied generally to the economic growth where they exist.