Don't Bet Against McDonald's

The investors who seemed to lose faith in McDonald's (NYSE: MCD  ) last quarter may now regret their decision to ditch the stock. McDonald's July same-store sales sizzled in the heat, driving the stock to a new 52-week high.

McDonald's global comps rose an amazing 7% last month. The fast-food giant wrested strength from all its geographic locations, with U.S. comps increasing 5.7%, European comps up 5.3%, and the Asia Pacific, Middle East, and Africa segment surging 10.1%.

In the U.S., McDonald's big story was summery beverages. Offerings such as McCafe Real Fruit Smoothies and Frappes, as well as value drinks, were helpful contributors to Mickey D's excellent monthly sales showing.

The drink angle is interesting. McDonald's aggressively competes with companies such as Starbucks (Nasdaq: SBUX  ) and Panera (Nasdaq: PNRA  ) to attract customers thirsty for chilly refreshment. Panera's most recent earnings conference call cited its own "chill" business, which consists of frozen drinks and smoothies made with Stonyfield Farm organic yogurt. Jamba Juice (Nasdaq: JMBA  ) is yet another contender.

Whatever McDonald's is doing, it's doing it right, despite all the heated new competition it's getting. Furthermore, it's doing just fine against the usual rivalry from other fast-food giants such as Burger King (NYSE: BKC  ) and Yum! Brands (NYSE: YUM  ) , which are rapidly cutting prices to drive traffic.

Given McDonald's compounding success for years now, Fools should think twice before betting against it. This high-quality blue-chip stock manages to innovate successfully and draw crowds, despite its venerable age. McDonald's still gives investors more reason to keep on lovin' it for the long term. Those are just some of the reasons that my Foolish colleague Jim Royal thinks Mickey D's is the dividend play for a lifetime.

Starbucks is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended a bull call spread position on Yum! Brands. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 10, 2010, at 3:26 PM, rd80 wrote:

    Sales growth - again

    Successful new product launch - again

    Dividend will get raised this fall - again

    Long MCD.

  • Report this Comment On August 10, 2010, at 4:09 PM, plange01 wrote:

    mcd is a great stock but not at its current price. let it pull back to about $50 before buying..

  • Report this Comment On August 10, 2010, at 4:09 PM, blaueskobalt wrote:

    I first tried the smoothies last week, and I have had two more since then. At about $2.50 including tax, I think they're a pretty good deal, too. I pay over twice that at the smoothie bar at the gym.

    I've been really impressed with MCD since that documentary "SuperSize Me" came out. They add more healthy and upscale options each year: premium chicken tenders, premium chicken sandwiches, premium salads, McCafe, and now the smoothies.

    I don't hold and MCD currently, but with the 3% yield, it is high on my list of stocks to buy.

Add your comment.

DocumentId: 1264892, ~/Articles/ArticleHandler.aspx, 4/21/2014 8:25:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement