My Lousy Timing with McDonald’s

It’s always good to look at my mistakes. In 2014, I added McDonald’s (MCD) to our Buy List. I can’t say I’m a big fan of their food, but I thought the stock was cheap and the company was poised for a turnaround.

My thesis was correct but my timing was off. The stock went nowhere during 2014 and I decided to boot it from the 2015 Buy List. Then in August 2015, the stock started to move. MCD went from a low of $87.50 in August to high today of $121.90.

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This morning, the fast food joint reported good earnings.

McDonald’s Corp.’s fourth-quarter profit and revenue soundly beat analysts’ expectations, as the company’s move to all-day breakfast helped drive the best quarterly results in the U.S. in nearly four years.

Signs that a turnaround under Chief Executive Steve Easterbrook was beginning to take hold emerged in the third quarter, when McDonald’s U.S. division posted its first quarterly increase in same-store sales in two years. That momentum continued into the fourth quarter with the launch of breakfast all day in early October—the company’s biggest strategic change since it rolled out McCafe beverages nationwide in 2009.

Investors expected all-day breakfast to boost sales, but not this much. Sales at U.S. restaurants open at least 13 months jumped 5.7% in the fourth quarter—far above the 2.7% growth analysts were expecting and the best same-store sales results in the U.S. in 15 quarters. Globally, same-store sales rose 5%, while analysts were expecting growth of 3.2%.

As Keynes supposed said, “markets can remain irrational a lot longer than you and I can remain solvent.” The guys in The Big Short had to wait and wait for their big bet to pay off as well. But it took time.

Posted by on January 25th, 2016 at 12:41 pm


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