McDonalds (MCD)

Run by a good CEO. He sees upside.

It reports Wednesday. The stock is out of synch from the company which is offering new, limited food items.

Ability to source domestically is quite high, so impact of tariffs would be neutral. Extremely well run. Very good at pivoting to whatever the customer wants. Keeps a close eye on it. Likes the business; valuation a bit high for pedestrian, yet predictable, growth.

Was downgraded last Friday and today over fears they won't meet expectations this quarter, including disappointment over MCD's new chicken strips dish, that it won't turn things around. Rather, customer prefer heavily breaded chicken and the find these strips ugly. However, history says it has never paid to downgrade MCD. It's the king, offering good value and is highly well-run. The CEO will figure it out.

He always says buy on dips. A machine, well-run by fine managers.

Well managed. Super-competitive environment. Noted consumer weakness in US and globally. Great job adapting to changing environment over the last 30 years. Growth only about 5-7%. More expensive US mortgages have reduced disposable income.

They report Thursday. Restaurants have struggled because of high prices, but MCD rolled out some cheaper offerings and customers responded, he hopes.

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.