5 Reasons to Buy McDonald's ASAP

Here are 5 reasons why you want to buy McDonald’s (MCD) off the back of yesterday’s irrational sell-off:

1. The flat same store sales for December will not be repeated as MCD guided (see conference call transcript) to a 1.5% comp for January.
2. Fiscal and monetary stimulus will benefit MCD.
3. The stock has corrected 20% from where I already alerted long term investors to take some of the stock off the table.
4. Growth in China.
5. Expansion of McCafe concept in Germany, which I believe will eventually be MCD direct competition to Starbucks (SBUX) in the US.
   

I added stock on Monday's pullback.

Disclosure: At the time of this Blog entry Scott Rothbort, his family and or clients of LakeView Asset Management, LLC were long shares of MCD --- although positions can change at any time.

Comments

[Long-Short Guy:]

I wonder whether McDonald's could actually benefit from a recession, as meals are so cheap there that people trying to save money might spend more in McDonalds (ie. McDonald's meals are an "inferior good" in economic terminology).

Did any see if the company said anything about this in the conf call transcript?

2008 Jan 29 07:17 AM

[Long-Short Guy:]

Following on from my previous comment: Starbucks, in contrast, might get creamed (ahem) in a recession. Who can afford a $6 latte every day if you lose your job?

On the other hand, caffeine is addictive.

2008 Jan 29 07:31 AM

[Malkiel:]

I've assumed that most of Mickey D's recent prosperity was coming from overseas, because their domestic stores are a mess and have been for years--way too many items on the menu making the operation a precise coordination of time that most Mickey D's crews are woefully undertrained for, resulting in slowness and uncleanliness. Their domestic stores would be vulnerable to an aggressive competitor, or a good ad campaign from one of their usual competitors...

2008 Jan 29 11:18 AM

[User 120461:]

Are you insane? ASAP?
How about MCD being a good company, but also a slow elephant that every fund manager over-ownes. This company will grow sideways.
Rob,
WallastonInvestments.c...

2008 Jan 29 11:36 AM

[fgjsfd;g:]

MCD meals are not exactly cheap anymore. 1 meal easily can be $7.

2008 Jan 29 12:15 PM

[Rza:]

Starbucks might still be ok since a lot of unemployed people hang out in Starbucks looking for jobs.

2008 Jan 29 12:19 PM

[Jake2:]

A lot of people just hang out at Starbucks. No looking except at each other. And at some (most?) McD's these days you did to speak at lease a little Spanish in order to order a hamburger. "Numero dos, por favor!"

2008 Jan 29 01:34 PM

[vodka_tonic:]

take a look at the 5yr chart for MCD. in late '06 (around october) it was 40 bucks. mid '06 it was around 36. now it is 51.
it still seems expensive to me for what it does.

2008 Jan 30 01:55 AM

[User 145842:]

Wed Jan 30th
I admire your convictions. I would hardly call the quarter outstanding ( I understand your bias being a shareholder though wanting to get the stock price back up so you can sell to all the suckers who bring the price up listening to your *sound advice* )

US sales slowed in December. The worst monthly results in 5 years - supposedly due to "weather" ( god I hate when that excuse is used )

Part of their paltry 2.6% net income increase was due to a tax benefit

They were downgraded by Bear Stearns and Davenport & Co,

Company expect US sales to rise a paltry 1.5% in January ( the US story is over - with or without coffee bars ).

Adding coffee bars to their 14,000 locations is going to be the nail in the coffin for them. I wish them well.

Their stock is fully priced - current PE is almost twice the growth rate.


Full disclosure: I don't have positions in Starbucks or McDonalds.

2008 Jan 30 02:55 PM