McDonald's Is Still Not Lovin' It

McDonald's may be closing in on another all-time high, but the fundamentals are going the wrong way.

Jun 9, 2014 at 6:20PM

There's still some rust to shake off the Golden Arches. McDonald's (NYSE:MCD) posted another disappointing performance report this morning. The world's largest burger chain saw global sales improve, but the scary nugget -- or McNugget -- is that we're eyeing more weakness closer to home. U.S. comps slipped 1% in May at McDonald's, and that's not going to silence the unrest that's brewing among shareholders, franchisees, and consumers.

McDonald's seemed to be on the right track a month earlier. It posted flat comps at its stateside restaurants for April. That may not seem like such a big deal. Flat sales means that it didn't even keep up with inflation! However, it was still the first time that the burger flipper hadn't posted negative same-store sales for a month since October of last year. It could have been a springboard to better things, but apparently someone's draining the pool of its water.

Mickey D's is in a pickle. It's gone through three straight quarters of negative comps domestically. We've gone through several excuses. Late last year, it was the admission that it had strayed from its value message, alienating loyalists looking for cheap eats. Then we had the cruel winter that smacked around a lot more chains than just McDonald's. Where's the new scapegoat now? 

This wouldn't be so bad if all of the burger chains were reeling, but they're not. Burger King Worldwide (NYSE:BKW) doesn't provide monthly metrics, but it has posted slightly positive comps in back-to-back quarters.

Burger King is usually the one chasing after McDonald's, copying its menu moves and hoping that it can keep up. However, at a time when McDonald's is struggling to keep its bargain seekers and its push for premium items isn't resonating at the register, Burger King has been worthy of its paper crown by comparison.

It's not too late for McDonald's. It has the financial fortitude to keep tweaking its menu to get things right, and customers know that fast-food chains never stand still. It won't seem desperate as it tries to drum up the perfect combination of price and food to win back the hungry. It will just be a burger chain being a burger chain until it gets it right. 

Investors may not see it that way. The stock is inexplicably trading near the all-time high it set last month. Shareholders are getting a healthy yield of 3.2% to sit through the lull, but it doesn't seem right that the stock is holding up so well at a time when the fundamentals -- at least domestically -- are going the wrong way. The market shouldn't be positive at a time when the comps are negative.

Stocks to love for the next decade
The smartest investors know that dividend stocks like McDonald's simply crush their non-dividend-paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information