McDonalds (MCD)

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.

We have seen underperformance in this name, ever since the days started getting longer, in December. You can accumulate this. Europe is still a major part of their revenue and it has been lagging but is turning around now.

Even though it is a discretionary type stock, it has gotten thrown in with consumers’ staple type stocks and the stock has come down a bit. Right at the 200 day moving average so he would see where it goes from here because that is an important inflection point as to whether it is going to go up or down. A great dividend grower over time. Their challenge today is catering to today’s generation which is slightly more health-conscious.

(Top Pick Aug 13/12, Up 14.82) He has exited and rotated to Starbucks (SBUX-O), which is getting very good same store comparables. There isn’t a problem with MCD. They are basically a REIT because they are getting rent from franchisees. SBUX is a better opportunity.

Great brand. Struggled a little bit on their same-store sales but their track record of investing capital is impressive. Have lots of things working for them. What doesn’t inspire her is the valuation on the shares. Because it is a sort of “steady Eddie” business, there has been a shift in investor confidence with people getting more comfortable with the market so they are being put into stocks that are considered safe, such as this one. She doesn’t see a lot of compelling upside.