McDonalds (MCD)

Raised its dividend 25 years straight. Have always been about to reinvent themselves. The idea of a better, healthier, nutritional, organic locally sourced type of environment is really challenging right now. The dividend yield is the parachute that keeps him in this stock. He just heard that there might be an activist investor coming along to get this moving. Don’t give up on it.

Such a global company and the strength of the US dollar is an impact in terms of a headwind. It is certainly not going to be a growth story. There are probably better names in the space.

Continues to lose market share and also same store sales are down. Until they can turn this around he is leary of buying them. They are perceived to be selling less healthy food. Owns nothing in this sector.

He thinks there is something structural going on in this business. All of us are looking more at just what we eat and are more dietary conscious. This company was a great innovator with new menu items, and this is what will drive same store sales. They have been struggling. You’ll see 5%-8% growth, but he just doesn't see much in the way of upside.

This company has been having some problems in the US in terms of traffic growth. They also have exposure in Europe which has been hurting. Asia-Pacific and the Middle East collectively represents about 18%-20% of their earnings. Prefers Yum Brands (YUM-N) which has about 35% of their earnings from China.

This kind of reflects his view of where the markets are. The volatility is there. People will continue to eat here, through thick and thin. A couple of things that have put short-term pressure on them are the tainted meat scare in China and the Russian geopolitical issues. Over the long-term, those have not proven to be factors in the share price. The lower current price is a positive. This is really a defensive name. Have been in a huge rebranding kick.

Has been a huge fan, but now thinks you should probably sell it. It is not expensive, but it is out of favour. He does not see the stock doing that well.

There is no sense of urgency for the management to right the ship. The earnings have not gone anywhere in years and are manufactured because of share buybacks. If an activist came in and cuts costs and did more franchising there could be a material upside, and then they have to work on the menu.

This has backed down into his Buy range. Using 3.5%. Trading at 16X earnings. They will fix their food problems in China. Very strong management team.

The chart is pretty good. Even in ’08-’09 we did not get a material correction. So far it is still higher highs and higher lows.

Prefers Yum Brands. MCD’s presence in Asia is slower. Earnings profile is sub-par to Yum.

They are so good at what they do. The concern is the competition that they are seeing. 5 quarters in a row they have seen a reduction in same store sales in the US. They are ahead of their peers. You question how much better they can do. She would like a higher cash flow yield so is on the sidelines.

His preference is Tim Hortons (THI-T) where he thinks there is better growth. If you own, don’t Sell. Huge ROE. Great return on capital. Dividend growth and share buyback until the end of time with this stock. Valuation is reasonable.

You can expect a little bit of capital appreciation to the $102-$103 mark plus your dividend. Valuation is expensive but the company gets beat around quite a bit based on what it reports on same-store sales every month which he feels is a little bit unfair. Has a big EM business and a big European business. European business is getting better but the US business is a little bit mixed so they have to do some reinventing in their menu. They have the cash to do this.

Stock splits have become unpopular over the last few years. Companies’ decisions on splitting the stock to get more retail investors interested started to get diminished gains over the last couple of years. MCD drove a lot of growth through 2010-12. Now same store sale growth is disappointing. Ultimately he believes they will return to being the leader.