McDonalds (MCD)

(A Top Pick June 5/15. Up 37.16%.) There was a lot of pessimism priced into this company, and they have had a few things go their way. The main one is Steve Eastbrook who took over the business, and understands that the company needs to have a clear identity, as opposed to just being a generalist. Don’t expect the same upside. Pays a great dividend. Has a low beta.

He would not short it. It has had a very powerful break out. It might be a little over extended. Don’t stand in front of a frieght train.

(A Top Pick April 21/15. Up 39.87%.) Has a good board and a very well-run organization. Good dividend. They are growing same-store sales. A little concerned that they are using a lot of debt to buy back stock and increase dividends. Thinks they can keep going.

He did well when it was a top pick a year ago. It is good if you have a balanced portfolio. They have turned things around with the new menu, delivery and the apps. The beta is 0.6 so it is half as volatile as the entire market. You can live with it in the bad times. This allows you to be in the market, but not lose sleep at night.

(Market Call Minute.) The stock has done very well, but is quite expensive. There are other names in this space that are more attractive. They are expanding in China which is a positive.

(A Top Pick April 1/15. Up 35.91%.) Bought this in the low $90 when it wasn’t well-liked. There is good board involvement. They have had positive menu changes. 3% dividend yield.

(A Top Pick March 5/15. Up 24.2%.) New CEO has been juggling up the menu and opening up new McCafes, and the stock took off.

There was a lot of cash on the sidelines last year, as investors weren’t convinced the company could turn things around. But after the results we have seen recently, that conviction has started to diffuse into the market. Thinks there is going to be a new round of capital coming in from new investors who feel better about the story. They are still early in this turnaround. There is probably 10%-15% upside at the most, and then you want to get out. Dividend yield of about 3%.

A global consumer name. A giant ship that is slowly getting turned around and going in the right direction. Recently reported same-store sales up 4% in the last quarter, the strongest quarter since 2012. Once that starts to happen, it generally goes on for many quarters. They are trying lots of creative things in their stores. The breakfast is doing very well, and they can roll that out internationally. Culturally it is becoming much more flexible. Food inflation is a big benefit to them. Increased minimum wage in 20 states is good for their customer base. Dividend has grown about 9% a year over the last 5 years. Bought back 5% of their stock last year and are highly unlikely to be hurt by weakness in China and emerging markets. Dividend yield of 3%.

Concerned about their debt levels and their plans to return money to shareholders through buybacks using debt, which he generally sees as unfavourable. Their plans and progress going forward into the new MCAFE standalone stores and new menu items is positive, and there will be better growth from that. A nice dividend of 3%+.

(A Top Pick Jan 28/14. Up 33.01%.) He still owns and still likes it, but is a little apprehensive about the build-up in debt and returning it to shareholders. It’s one of the stocks that is on his radar screen. They are doing a lot of buybacks and increasing their dividends, but have been downgraded. Returning a lot of money to shareholders, which he agrees with as long as it is excess capital.

This connects with the basic unhappiness in the world today. Unhappy people eat and they love junk food. This company has languished. It is the monster of junk food companies. It suddenly got fired up when they came up with the idea of having higher junk. Have also performed the miracle of understanding the importance of the “all day” breakfast. He is hoping for a bit of a pullback in order to buy more.

3.4% dividend yield. They are growing earnings at 8% compounded over time. It has a huge global franchise. It has some natural hedges on the currency side. They are rightsizing the menu. They are going to solve their problems and grow again.

They struggled the last few years since users have gone to more fresh and healthy food. You are betting on their ability to make the transition. This is the not the first time they have turned the business around. The new CEO is rolling out new innovation. You can buy this and live with it in bad times. Good dividend, good valuation and they are executing a turnaround.

The story is improving. Their same store sales are actually improving except in the US. They are going to close more restaurants in the US than they are going to open. It has held up fairly strongly in the down turn. A good dividend yield and they buy back a lot of stock. They have real estate holdings also. He prefers SBUX-Q.