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Over on “The Reformed Broker” blog, Downtown Josh Brown (@ReformedBroker) provides cogent analysis of the performance of McDonald’s stock within the context of its business model and products, complete with his trademark wit:
The financial media seems to be highly taken with the fact that McDonalds is breaking new all-time highs and has had yet another huge year versus the flat broader market. $MCD is up 120% in the last five years while the S&P 500 is down 20% over the same time frame. The business of poisoning people around the globe with dirt cheap pseudo-food supplied by the factory-farming cartel has never been better. Really exciting for mankind.
Over the past several weeks, I had been looking for a reason to get involved with McDonald’s on the short side, largely because of its extended monthly chart. I had a profitable short MCD trade inside 12631 last month, but it was rather quick in duration, given my respect for the overall trend higher. As you can see below on the monthly chart, the angle of ascent has become quite steep during the stock’s nearly nine-year long bull run that began amidst lawsuits from obese teens and the documentary, Super Size Me, in 2004, where Morgan Spurlock eats only McDonald’s cuisine for one month in order to show the audience the negative effects on his health.
At this point, despite the apparent parabolic nature of the price action, the move higher still seems orderly, and there has been no indication of a blow-off type move in volume. Hence, I am in no rush to put on the big contrarian short with any sort of conviction yet. There are plenty of steadfast McDonald’s bulls looking for that seemingly inevitable move through $100 for the “Hundred-Dollar Roll.” That said, I am on watch for signs of buyers’ exhaustion in the coming weeks. As an example of how steep the climb has been, it has been over two years since the stock has so much as tested its 20 period monthly moving average.
Apart from the potential short, from a broader perspective there is something else at play here. We know that many of the high growth leaders since 2009, such as AAPL AMZN CRM DECK GMCR NFLX PCLN have all been flashing ominous signs of late with relative and absolute weakness on sloppy charts. So, the issue then becomes whether those leaders are going to pull the entire equity market down with them, or if instead we see a rotation to more value-oriented, larger cap names. You could make the agreement that McDonald’s is the poser child for that type of mega-cap Dow stock where fund managers would look to rotate. If that is the case, then McDonald’s would be attempting to save the world with its stock price, while killing it with its food.
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Been in this one a long time (years). Seems to be running super hot right now, too hot. Great points about timimg though.
Pleasure to read this post. TJWP has some excellent commentary on $CMG as well. Another leader who I believe is due for some pain.
ChessnWine:
Excellent pic! Great reading, too.
I became enlightened to the reality of factory farms, battery cage chickens, etc.
I rarely eat meat, and drive thru is something my wife and I haven’t done in a year, and when we are desperate we will get something that is vegetarian in mature.
Factory Farms are still a well-kept secret, way too much money and lobbying being spent to keep it that way.
Don’t even get me started on genetically modified seed patents. Monsanto and Cargill run the fast food world.
I must admit I used to like to trade MOS and POT. Does trading these world ruining companies give you bad karma? lol.
(happy to know you are one of the aware and awake human beings)
I think if the Fed. Doesn’t print this is exactly the kind of stock that the big boys will go to.
After watching Super Size Me, I can’t even go into a McD’s.
Couldn’t agree more. I step in Mcdonalds about once a year lol
i didn’t read a word, but am here to remind readers i called this in the spring.
$MCD.
Good Day!
shut up
Hey Chess, speaking of behemoth companies, what do you think of WalMart? To my eyes it looks like it’s been consolidating for the past 12 years and could be on the verge of breaking out. Any thoughts?
http://ibankcoin.com/chessnwine/2011/10/09/the-rural-folk-and-the-south-will-rise-to-wal-marts-rescue-once-again/
MCD is just a freaking stock, why all the anger? In any event, McDonald’s is now a place for business people to have a cup of coffee and get some work done.
No position in MCD, but long 75 other companies that all have some bad aspects to them.