McDonalds (MCD)

He is not prepared to make a bet on a stronger economy but is willing to be invested based on the fed actions which force people to put money to work. This one certainly fits into this camp. Tremendous balance sheet. Generating lots of cash. Very predictable earnings growth and dividend growth.

Very interesting story at this level. Same-store sales pulled back a little bit and people sold off the stock. Have been very good dealing with their commodity issues. Have done a very good job with their menu and will continue to do that. Have a lot of room to expand internationally.

Has been a wonderful performer and has done amazingly well. A crack started in February with same-store sales being disappointing both domestically and internationally. Too expensive. Would prefer in the low $80’s.

Has been a little volatile recently, which is unusual for them. Doesn’t have any problem with the company. Picking an entry point would be his only challenge. Very good innovators and marketers. One risk would be if income levels changed and there was a substitution of fast foods and people wanting to spend more but he doesn’t see this as a threat in the next little while.

Trading at 15X versus 20X for Tim Hortons (THI-T). 3.3% yield. Disappointing same-store sales was primarily because of currency. Still selling hamburgers in Europe but were getting Euros for them which were worthless when they got them back to North America. Looking for it to reach mid-$90’s.

(Market Call Minute.) It is not often you can get a stock of this calibre when it is down 15%.

One of the things that has made this market tricky is that a number of key themes have continued to work (more or less, the yield themes) but the market has narrowed meaning fewer and fewer of these themes continue to work. One of these is the consumer discretionary theme. This stock has had a very strong move over the last couple of years and over the last few months has started to disappoint on the revenue and earnings sides. You want to give this theme more time.

(A Top Pick Aug 18/11. Up 5.5%.) Sold his holdings at $97 and it has been backing off since then. Not the place to be now.

Has given up a little bit this year because of their European exposure. They are fantastic operators. For the stock to really do well and take off from here, you need to see acceleration in the US economy and stabilize Asian and ultimately a recovery of the European economy.