McDonald’s (a Blue Harbinger 15 stock) is a great example of how it pays to be a contrarian investor. Despite a recent outpouring of negativity about the company in the media, McDonald’s gained over 8% yesterday after announcing its earnings beat Wall Street expectations on stronger than expected sales. Over the last year we’ve heard the pundits crying things like “McDonald’s is too big,” “McDonald’s can’t compete with healthier alternatives,” “McDonald’s brand is dead.” And despite the negativity, McDonald’s has outperformed the overall market (MCD is up 23% in the last year versus a gain of only 6% for the S&P 500).
We continue to believe in McDonald’s going forward as the company moves past some historical missteps, and it continues to be a cash generation machine with lots of growth opportunities. Regarding missteps, McDonald’s had some supplier issues in China last year that caused a large drop in sales, but this has been corrected and the company continues to gain traction in China. Additionally, new CEO Steve Easterbrook has made changes to simplify the menu and improve some ingredients which should also help profitability going forward. Also, MCD’s introduction of all-day-breakfast in the US is expected to have a positive impact on the company’s future earnings announcements.
You can read our previous McDonald’s updates here, and our complete McDonald’s thesis and research report here.