McDonalds (MCD)

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.

Stock has really underperformed this last year. A lot of people are focusing on their growth, which has slowed down a little. Valuations are starting to look a little more attractive, but still not attractive enough for her.

He has YUMS. The question of fast food is still in its infancy in world markets. Their innovation in the menu area is a concern. A safe place and a great stock with long term growth potential.

Longer term it is known to be the company that raises its dividend. He is concerned about it adapting to the generation that prefers healthier foods. They are making renovations but can they meet that new generation in terms of demand. Price promotions are very aggressive in their space. He owns YUM brands and likes SBUX

$99.20 Model price, 4% upside. Pilled back nicely to EBV +6. You have great support there. Get it on a rally if you want to sell it, thinking it is dead money. There is better value elsewhere, but it is a quality company and will .move up with the S&P.