Tuesday, October 6, 2009

why McDonalds is a good investment

Grab some shares of McDonalds (MCD) now and you might not have to work there in retirement.

You can say what you want about how morbidly unhealthy the food is, or how they market to kids, but they do know how to grow the value of your investment. The fast food icon, which is actually the world's sixth most valuable brand, and the second most valuable food related brand, second only to Coca-Cola, has been around forever and is showing no signs of going away. What makes McDonalds shares such a good place to have your money invested? Let me count the ways...

1. The Food Tastes Good
Ok, I happen to believe that Brussels sprouts taste good as well but you can't pull up to a shiny window and order a 6 pack of sprouts with dipping sauce. The taste of McDonalds food appeals to many convenience seeking people, and they adapt their menu well to cultural tastes in any country they operate. It's quick, it's predictable, it's convenient, and it satisfies.

2. They Market To Kids & Adults Don't Really Mind
Oh, what a bonus for a two year old to get a free toy out of a drive through trip to the golden arches. Perhaps Mom & Dad will feel better getting the optional apple slices instead of fries with their happy meal. They have play gyms inside their stores, they sponsor kids sports, they give loads to charity, they are armed with a team of on-staff cartoon characters including Ronald and whatever movie Disney is pumping this month. McDonalds is basically a well-honed marketing machine that neither 'Super Size Me' nor 'The Subway Diet' can stop.

3. The Fundamentals
Mmmm, the dividend growth, just makes my mouth water. They've raised their dividend each and every year since 1976. They just recently raised it by 10%, at a time when other company's CEO's are eating Quarter Pounders and liking it, to cut costs wherever they can. McDonalds annual sales growth has been very consistent, their EPS growth over the long term has been great, and they generate returns on equity in excess of 15% most years. All this while maintaining a moderate debt level of $0.76 per $1.00 of equity.

4. The FutureBold
The key to this companies future lies in management and adaptation. They've proven in the past that they are able to adapt to changing tastes and customer preferences. As they move through the developing world I am confident that quality of life improvements will go hand in hand with the need for convenient food that the kids like too.

Buy McDonalds in any economy. This is not a recession stock. Don't let that analyst with Big Mac sauce on his tie fool you.

9 comments:

Anonymous said...

Why it's not good: you profit on selling products that rape the planet and leave its common monkey consumer spent, fat, and sick. Let's just invest in child porn and electric chairs while we're at it!

Listen people: the world isn't just some place for capital growth opportunities. It's a project, and you live in it, and so do all of us. Make it better for you by making it better for all of us. McDonald's is not a part of that picture.

Hey Moneygardener... change your banner picture to children in rice fields, or cellulite and tumours extracted from rich fat American McDonalds investors! You sorry, sorry yankee.

Anonymous said...

MoneyGardener is Canadian BTW.... Nice hippi rant..... Go hug a tree.....

Chris said...

Yes, yes Moneygardener is evil. I eat McDonalds so I am evil. Given all that, do you know how I can invest in electric chairs? Crime rates go up during tough economic times, business must be booming!

Sampson said...

Not sure why MG - but you seem to attract voracious opponents and lots of nuts - myself included ;)

I'm not sure about the tasting good part...

I just bought in recently too even though it pushes my 'discretionary' allocation a bit high I like to think of MCD and KO more as 'staples' anyway ;)

What has me more convinced is not their dominant branding and market share, but the skill of which the company came out of their early 2000's funk - it was stagnant, losing market share, but management skillfully brought them back into fantastic and steady growth rates.

MG (moneygardener) said...

Nice to hear all the wide ranging opinions.

Sampson, I don't believe you about the taste.

Thomas J Venner said...

Personally I hate MacDonalds food, it's garbage. I also hate all things Disney, but that's just me. If it makes money and is a solid investment, I will buy the stock. I worry more about the devaluation of the US dollar, I hope it recovers when you go to sell the stock cause I see it dropping significantly over the near to mid-term.

Anonymous said...

I agree that McDonalds food is garbage and tastes good only to the unfortunate addicted to it. The evironment cost of the crap is horendous and they are not paying it. The health-care cost is extremly high and they are not paying it. Considering that more and more people realize that we cannot continue to subsidize that crap and fair taxes on the crap are hopefully close to being imposed, I don't think it's a good long-term investment. Either they will be taxed into extinction, or we will be driven to extinction by our stupidity. So I guess I will pass on investing in McDonalds.

Dividend Growth Investor said...

I am long MCD stock and I like the company's ability to grow organically and not only through opening new restaurants. People are hooked on MCD's stuff and MCD is able to raise prices consistently.

I personally prefer eating @ Burger King, although MCD is a better stock to own. I also prefer drinking Coca Cola, but I believe that Pepsi is a better investment. Go figure ;-)

Boris said...

My mind says McDonalds is a place to have food and fun and not a place to put our money there is a limit to each and every organization. Usually I will get the the investment and Insurance ideas from http://www.insuremetoo.com pleas check it out friends.