McDonalds (MCD)

He trimmed it last year due to continued cost pressures and valuation. Is worried about sales growth stagnating and more competition.

It recovered a few dollars today after falling on the illnesses caused by the Quarter Pounder. We don't want that gain. Rather, we want upside on a good quarter--they report tomorrow. 

It was over bought to begin with before the recent difficulties. It is in a trading range so if it hit $260 or $270 he would buy it.

MCD reported an E. coli outbreak from its quarter pounder burger across 10 US states. The outbreak started between late September and mid-October. MCD has temporarily stopped using certain ingredients in affected areas. The stock fell sharply the day following the news, and it is currently down 5% (an $11B market cap loss) from just prior to the news.  

We do not feel that the outbreak warrants an $11B loss to the stock, particularly over the long-term, but the stock has run up nicely over the past few months, and this could partially be profit-taking in conjunction with the news release. We would prefer to see the stock find a floor before entering a position, but over the long-term, we would be comfortable holding the name.
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Their decision to extend their $5 meal beyond the summer was applauded by consumers and Wall Street alike as consumers are pushing back against higher prices. Smart.

He added at $250 a month ago. With inflation the lower income population shifted more to eating at home and away from fast food restaurants. McDonalds is now moving to more value priced deals and encouraging people to shift to digital offerings, apps, to increase the use of a loyalty program. McDonalds has a unique business model in that it owns the land that the franchises sit on. 40% of its revenue comes from rent from the franchises.       Buy 28  Hold 13  Sell 0

Consumer staples have been performing under the radar and will continue.

Money is tight for many Americans and even fast food is now considered "discretionary" spending because prices are too high. Nobody expected this, but it's a real now. McDonald's now realizes this and will extend the $5 Meal Deal into September, says the CEO at the Q2 conference call.

Shares fell this year, because many felt its food was too expensive. This morning, they reported disappointing same-store sales, a big sales miss and earnings miss, but shares jumped nearly 4% today. Why? The rally is broadening beyond tech/AI. Also, the street expected MCD's bad numbers, and they introduce $5 Value Meals.

It's tended to be a great when you buy this down (-12% this year). It's such a powerful brand that people can't get enough of it.

Was on her watchlist for a while. Pulled back, down 15% YTD, so she added to client portfolios about a week and a half ago. Global, 100 countries, 41K units. Very profitable business model of 94% franchised. So franchisees pay a royalty percentage of topline sales plus, uniquely, rent for the buildings and land (39% of total revenue). Cashflows are visible and defensible. Yield is 2.63%, dividend increases for 45 consecutive years.

Quick service has lagged due to higher unemployment, diminishing savings, price increases. Renewed focus on value, scale helps them accomplish this.

He trimmed it last January, but wishes he had sold it all. All performance has been driven by price increases, and those days are over. Be careful here.

Shares are down 7% this year. The problem is that their menu prices rose and are too high. They need to cut prices.

His price target is $300. Has owned this for over a decade, a great dividend compounder, but he wouldn't rush into it now.

We live in a country of two consumers: those flush with money and those struggling to buy at dollar stores. MCD reported today and shares fell. Same-store sales grew 4.3% YOY, but felt pressure from the Israel-Hamas war. More pressure came from consumers who are eating at home because packaged foods are more affordable than take-out.