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Why McDonald's Wins as the Dow Wavers

By Dan Caplinger - Apr 4, 2013 at 11:03AM

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Concerns about an economic reversal could actually help the fast-food giant.

Today's trading in the Dow Jones Industrials (^DJI 0.60%) demonstrates the ongoing battle between bulls and bears over the prospects for the economy. On one hand, signs of strength in the housing sector have bolstered hopes that the key driver of economic activity will continue to pick up and benefit workers throughout the economy. Yet this morning's data on jobless claims added to concerns that overall employment trends continue to lag behind, raising fears that the U.S. may join other countries around the world in seeing already-sluggish growth rates decelerate further. After yesterday's big drop, the Dow has regained 37 points, or 0.25%, as of 11 a.m. EDT today. The S&P 500 is up by a similar percentage, and the Nasdaq is down slightly.

Yet even if the economy is poised for a slowdown, certain stocks will likely benefit. McDonald's (MCD -0.21%) is up more than 1% this morning, climbing above the $100 mark and approaching all-time highs. Even as the company faces a strike in New York City by workers who want better pay, McDonald's attracts defensively minded investors because of its record of holding up well in past downturns. The fast-food giant was one of the few stocks that actually rose during 2008's bear market, and with stocks teetering at current high levels, investors want that kind of protection again.

Best Buy (BBY 8.97%) has gained almost 10% after making a deal with Samsung to feature in-store Samsung shops within Best Buy retail locations. With Best Buy having announced yesterday that it would discount third-generation iPad tablets by 30%, it's clear that the electronics retailer is trying to play the rivalry between Samsung and Apple (AAPL 0.11%) to its best advantage. Apple shares have dropped 0.8% this morning, as the Best Buy move only highlights the iDevice giant's struggle to convince investors that its growth story is still intact.

Finally, organic LED specialist Universal Display (OLED 2.76%) has risen 6.7% after getting an upgrade from analyst firm Needham. The stock remains well off its lows, as the company has waited for display makers to adopt its OLED technology in larger applications, especially big-screen TVs. With plans to ramp up production in the next year, though, Universal Display remains a valid long-term play on the future of OLED use in mainstream tech products.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$32,120.28 (0.60%) $191.66
Apple Inc. Stock Quote
Apple Inc.
$140.52 (0.11%) $0.16
McDonald's Corporation Stock Quote
McDonald's Corporation
$244.01 (-0.21%) $0.51
Best Buy Co., Inc. Stock Quote
Best Buy Co., Inc.
$80.06 (8.97%) $6.59
Universal Display Corporation Stock Quote
Universal Display Corporation
$119.97 (2.76%) $3.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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