The picture has not been painted pretty for equities lately, and it is leaving many hesitant to be involved in the markets. Some names have outperformed the market, like AT&T (T) and Wal-Mart (WMT), while other have been demolished, such as Netflix (NFLX) and Green Mountain Coffee Roasters (GMCR), just to name a few. However, when some companies get quickly sold off, it may be time to open up our wallets. Names like McDonald's (MCD), which was down about 3% pre-market to $85.75 (as of this writing), on news that slumping sales in several regions. Here is the Seeking Alpha excerpt:
Friday, June 8, 8:17 AM McDonald's reports global comparable sales were up 3.3% in May. Sales rose 4.4% in the U.S. as new breakfast items contributed and Europe saw a 2.9% gain, but Asia/Pacific, Middle East and Africa saw a drop off of 1.7% for the month. Shares -2.6% premarket.
Last fall, during record volatility, we saw a flight to safety in something different. Investors were flocking to McDonald's. McDonald's is obviously a very solid company, with a healthy dividend and tremendous global presence. It trades at about 16 times earnings and is aligning itself to continue the rapid growth we've seen before, but doing it overseas as well. As it stands today, we see McDonald's approaching the same price levels it was at around late summer in 2011.
Above: One-year chart of MCD (click to enlarge. Courtesy of Stockcharts.com).
Many have been proclaiming they will add to/start a position on a pullback from McDonald's. Well, currently off over 15 points from the high several months ago, I would say this qualifies as a pullback. For the long-term investor, I would think the $85 level would be a good place to start a position. However, in my honest opinion, I feel as though McDonald's will likely continue downward, at least for a few more points, possibly finding support in the lower $80 level. The 52-week low is $80 on the nose, and having blown through both 50- and 200-day simple moving averages, I feel as though previous price behavior alone will act as the support.
With many fearing a slowing economy and a meltdown in Europe (both potentially good things for McDonald's), investors need somewhere safe to put their money, again. Names like Apple (AAPL), AT&T (T), Coca-Cola (KO), and several others will be the equity names people flock too. McDonald's is likely be one of them too. With a quarterly dividend of $.70, it yields close too 3.25%, not a "high yielder" by any means, but certainly a respectable one.
McDonald's could continue to see selling in the coming days and weeks. It could suffer from both individual investors, as well as selling pressure in the broader market. Either way, this name is trading much closer to its 52-week low, rather than the high. With a healthy balance sheet and a nice dividend though, this stock will pay us to wait, and is an excellent long-term name. Establishing a position could be done today, but personally, I would only make it a small one, so adding can be done along the way, considering the selling may not be over yet. I am a buyer at $82.5 and below, for now.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MCD over the next 72 hours.