McDonalds (MCD)

They demonstrate everything that is negative about stock buybacks. You erode your book value and now they trade at 100 times book value. It is trading at only 20 times earnings, however. He calculates a fair market value 46% lower than where it is now. The balance sheet is mediocre, but not strong. He does not think you are buying anything of value with this one.

Likes it. Management has done a fine job transforming the company by introducing fresh food, the all-day breakfast, and now fresh burger meat. They are Doing well in mobile pay and introducing delivery. They are keeping current with the times. It isn't a cheap stock, but decent.

This has negative equity (negative price to book). They blew out all their equity in stock buybacks and other payouts. Passive investing has created a growing trend among S&P-500 companies to ignore their valuation because ETF investors don’t do any analysis. This is evident among defense stocks, consumer discretionary companies, consumer staples, and so on. He does not see companies like this going higher and if the company ever stumbles, there is no book value to fall back on.

Fast food is cyclical based on gas prices. Restaurant sales took off when gas prices plunged in 2014. Also, restaurant haven't seen earnings growth vs. other consumer discretionary spaces. He doesn't see a catalyst for this stock to
improve. That said, it's had a good, long history and their foreign sales are a tailwind.

Pizza or burgers? McDonald’s has a slight edge over Dominoes. At a 20 PE ratio, MCD-N has a better valuation, whereas DPZ-N still needs to grow into its PE ratio a bit more. He likes both companies with good management and good secular growth. A more conservative position is with MCD-N.

It's a both a quick-service restaurant and a REIT. REITs are under pressure, because they're interest-rate sensitive. Restaurants are performing pretty well, including McDonald's. Building digital kiosks in their stores is a good move. But other restaurants, such as Domino's Pizza, have a better growth rate. McDonald's will grow its dividend over time and probably operform in the middle of the pack for a while.

(A Top Pick June 13/17 Up 11%) He is happy with this as they continue to develop mobile applications and rivals Starbucks. They have a great distribution as well. Worldwide sales are rising. Over the past three years the stock price increase has been stellar.

It recently touched its last low. It's a so-so chart over the past 3 years. Hold it, but don't be a new buyer.

Not a particularly volatile stock. It’s very healthy. Tends to move in a very tight channel. If you want to trade it short term, you can. Its volatility is much less than the market. When a stock is in an up channel, try to buy near the bottom of the channel.

In 2014 you were seeing negative same store sales. They brought in a new CEO, and have done a really good job of getting the menu shifted to consumer preferences. The company is really doing well. 6% same-store sales growth in the last quarter. The trade-off is that valuations have moved up with all the good news. Now it has gotten pricey and is too pricey for her.

He likes it a lot. He is cautious on the space and is underweight right now. Restaurants and especially this one have been stellar. They have really turned around and are a hero.

This has been a fantastic performer. Without question, it is the best restaurant property in its space. Over the decades, they have reinvented themselves a number of times, from a burger/chip joint to a healthier menu. They’re also becoming much more efficient in their operations, currently franchising a large percentage of their company owned stores. This gives them higher return on invested capital.

He likes the company and it is a very resilient business. Management is world-class and are always innovating and finding ways to reinvent themselves. His concern is the valuation. Trading at 15X on an EV to EBITDA basis, which doesn’t give a lot of room for error. He would like to see a pullback before getting in. 2.3% dividend yield.

(A Top Pick Jun 13/17, Up 17%) They are engaging mobile and driving traffic. They have gone to a healthier menu and better suppliers. They are back to a growth footing.

Trading at close to 25X Forward Earnings with about a 10% growth rate. They’ve turned around their story with healthier foods on the menu. Have changed the way they do things and it is growthier. Feels the space is a little expensive and he would look at other names.