Is McDonald's (MCD) Still A Good Stock?
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- Äas pĆidĂĄn 25. 07. 2024
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McDonaldâs (MCD) is the oldest holding in my portfolio, but hasnât performed that well over the past year or so. With concerns over the economy, the health of the American consumer, and Starbucksâ recent poor quarter many investors are wondering if McDonaldâs is still a good stock. In this video we break down McDonaldâs business, see how theyâve been performing, and what their outlook is for the future.
00:00 How does McDonaldâs business work?
06:42 McDonaldâs recent performance and comparison to Starbucks
13:38 Outlook and overall thoughts
*I am not a licensed professional or a financial advisor. This content should not be taken as financial advice. It is meant for educational and entertainment purposes only. All opinions and perspectives are based on my own personal financial situation, experiences, and goals. Please ensure that you do your own due diligence before making financial decisions and/or meet with a professional. Links above include affiliate links, which means I may receive a commission at no additional cost to you.
"Come on, give me a break" đ is exactly how I felt when I saw the SBUX CEO interview, it was painful. Thank you for explaining the MCD business, I actually had no idea what to make of their earnings report before watching this video. I've been quite impressed over the past few years by how they've adapted / varied their menu. Great stock to have in your portfolio, it serves its purpose and delivers the results you are expecting.
It makes more sense to me to buy companies that I love and frequent rather than companies I know nothing about- great video, Matt.
Thanks!
Yep, in Canada we have Canadian tires, use to be a hardware store chain, but today they are a REIT owning the land and having a store to pay for the cost of the "mortgage" and once paid, all profits is "gravy".
MCD has a resilient busines that is easy to understand, I like it even if doesn't outperform the market. Long MCD for dividends and capital appreciation.
MCD vs SPY 30 year return hypothetical $10000 invested in
MCD $359,026 or 12.5% / year
SPY $186,606 or 10.1% / year. MCD has been a wealth compounding machine since its IPO (I am long MCD)
Thank you for the good and fair analysis. Good job!
I appreciate it, thank you!
Great deep dive analysis.. not a high flyer; but, great value play.
Thank-you for the analysis!
Thanks!
Great video, Matt, MCD still holds a nice place in my portfolio for the long haul... I think we are in the midst of hard times for consumers .... Oh inflation... the joy!
Thanks!
The most severe drop in MCD price going back to 1985 (occurred from November 1999 to February 2003). All other dips in the stock price have been road bumps on a wealth compounding journey. As Matt said, MCD is a stealth real estate play. And they facilitate their tenants (franchiseeâs) ability to pay rent via an ingenious method. I believe one of their biggest mistake was spinning off Chipotle Mexican Grill. But hind sight is 50, 50.
Agreed CMG would be such a huge win had they held onto it!
Great video! Really explains the difference in business model for MCD vs other restaurants!
Matt, I love the stories about you and your daughter going to McDonald's and making memorable moments that's why MCD is my favorite investment. I'm adding it when it gets under 265 thanks for your videos.
Thanks, I think itâs fun when you have something a little extra with a company. Not necessarily obviously and you still have to analyze it with an open mind and all that. But it does add a little something extra which is cool
Thanks a lot for this video! That is quickly becoming my favorite investing channel. Matt, you sir, are the real MVP
That's awesome, thanks!
Iâm literally biting a Big Mac when watching this. Great stuff Matt, we appreciate it đ«Ą
lol nice!
I see MCD as a foundation block like some other companies, MSFT, WMT, CAT, PG, and the ilk. It's the premier company in it's field and worth holding (although I don't own it directly). I also think MCD will be tepid for some time despite special offers via its app. Households are more and more financially stressed and when that happens discretionary spending is the first thing to be cut. I personally don't dine at McDonald's or, for that matter, fast food establishments in general largely due to nutritional value. Of course when my daughter was young it was a different story (I think we still have a box of McDonald Happy Meal toys). If someone has held it for a while I'd hang on to it. I wouldn't be a buyer now mostly because it doesn't fit my portfolio allocation at this time and I think we might see a bit more decline in its price. I'd put the support level around $260 thus offering some nice upside potential.
Really enjoying your channel Matt. You seem like a Mensch, navigating this investment world.
Thank you, much appreciated!
great video, at what site do you show the graph at 4:27?
Thanks! Seeking Alpha, charting tab
Hi Matt, Great Video, been waiting all weekend for this.
There are 6 restaurant companies in the S&P500 Consumer Discretionary sector: MCD, SBUX, CMG, DRI, YUM, DPZ
SBUX - I agree with you, especially after I watched the Jim Cramer's interview with their CEO, that guy with his interpretation of "Value" is a huge disaster.
CMG - The 68.03% PE is crazy high for my taste. I did bought this stock a long time ago at $60 and sold it at $125 (at that time, I was so proud of myself.)
DRI - I feel that casual dining vs QSR, more customer would gravities toward QSR. I went with wife to Olive Garden and when paying the bill, their portable credit card machine starts at 18% tips and the waiter just stands right next to us.
I am left with MCD, DPZ and YUM. DPZ is still affordable with their $6.99 choose any 2 or more deal. YUM is because they are doing a stock buyback.
I figure to pick your brain on research that you have already done, Any thought / comments on DPZ / YUM?
Thank you and Cheers,
I havenât dug into YUM so I donât have anything intelligent to say there. Iâve looked at DPZ in the past and theyâre super interesting and have been an absolute great performer. Itâs been a while since I looked at their fundamentals but they were one I tagged with âinteresting when the valuation gets attractiveâ
The real question for you will beâŠdo you need to invest in a restaurant? If you really want to thatâs cool. I ended up putting a chunk of my SBUX proceeds into META because it was sitting there around $450 / share and 15 P/CF.
Obviously I dug into their business but at a high level - do I need to invest in a lower margin industry with companies that tend to carry a lot of debt? Or do I allocate money to a company with platforms housing the most active users each month performing at a high level and a lower P/CF?? It seemed like the much more obvious decision to me.
Anyway thatâs probably not very helpful but thatâs I approached it. In my case I already owned MCD so there was nothing to do but hold.
lol what is a 68% PE? What kind of analysis is this
@crohmer lol I think he clearly meant 68 P/E and itâs just a typo
@@mattderron @crohmer Gentlemen, I was eating Popeye fried chickens while typing with greasy fingers, thus the extra "%." Going forward, I will finish my meals, wash my hands and focus 100% while typing to my favorite stock picking CZcamsr, Matt Derron.
Answer to Matt's Real Question: This is something that I want to do for a very long time - Buy one stock in each of the S&P 500 ten sectors (exclude REIT), thus I am "diversified." On 1/2/2025, I will put $1,000 into each stock (my broker allows fractional share) for a total of $10,000. I picked restaurants for "Consumer Discretionary" because I used to work in the Accounting Department at Sbarro, so I know something about QSR (Peter Lynch - Buy What You Know). This is for fun so if my 10 stocks portfolio is lucky and beat the S&P 500 by 12/31/2025, I will tell my wife that she married a top 10% stock picker.
This made me laugh đ. In terms of your plan...I get it. The funny part is that McDonald's is somewhat similar to a REIT in that real estate is a big part of their business. I do think in the short term MCD will likely underperform, mostly because the consumer is likely to spend less and rates will likely stay higher and they carry a lot of debt. Same reason why REITs are getting smashed right now.
So for folks willing to sit on it and collect their dividends, the business I think will weather the storm, but I'm not expecting outsized performed from MCD as a stock due to those other factors until they clear up a bit. Just my opinion on it.
I have been waiting on this video for a while. MCDâs is one of my positions in my portfolio and has by far been performing the worst. Earlier in the year I had indicated that this is a year to buy up this stock, but now I have backed off some. You have certainly helped me better understand how their business operates. I still feel strongly about MCDs and I will continue to add to my position, but I am going to slow it down a bit. Thanks for your analysis it was very good.
It has not performed well since Iâve held it (Dec 2022) although itâs had some rallies it just hasnât sustained them. I touched on it at the end but the combination of consumer challenges and rates being higher will likely keep the stock down for a while. So it really just depends on what your goals are and timeline vs expectations for the stock.
For me it balances out the other parts of my portfolio that are tech / finance heavy but I wouldnât be surprised if it kept underperforming for a while given the current environment
Great video. I am also looking to buy mcd, because i love the business and the margins and their products. I go there often and so does my Gf. I also want to own pepsi and Coca Cola bc of the same reasons.
AND! its more important to me to know that i own something i WANT TO OWN, than to just chase tech stocks. Because WHEN the downturn comes, it is MUCH EASIER to hold stocks you love, than to hold something you just bought because it went up alotđ
Totally agree, definitely easier to deal with all the noise when you're confident both in the business and also like the company!
Great video! I like MCD too. Best,
Thanks!
I could be missing some context but how can they drive more awareness about their value in the US? More tv ads, more app notifications? Iâm just not sure how they are going to amplify the value to average consumers. To me, the value is exclusively on the app these days and regardless of age, the app is not always convenient to use. In fact itâs generally a slower process. Idk I like the company but Iâm a little lost on them saying that.
Also, great video. Loved the editing and the way you made this engaging
I think what theyâre saying is - local campaigns regarding value have been working but they can do national campaigns to offset the âMcDonaldâs isnât cheap anymoreâ narratives. They push for a nationwide $5 meal deal is an example. Whether or not that moves the dial, I donât know
Thanks!
@@mattderron yeah it will be interesting to see, Iâll still hold it for a while. Iâd love to hear a Sweetgreen breakdown video like this one. So far, itâs the best performing restaurant stock of 2024 đź
I think mcdonalds is a fine company, im just not confident that theyll outperform the index over the next 10 years.
Otherwise i think its a fine dividend growth stock.
It very well may not
Friendly challenge (no offense intended), write your predictions down with todayâs date in your investing journal. Personally, my predictions have been wrong so often I simply buy and hold businesses with a moat. My definition of moat is the top 3 businesses in any slice of the market. My crystal ball was wrong about SBUX AMZN COST MA GOOG Netflix TJX (I started keeping an investing journal in 2006 đ). Best wishes
It's one of the best companies to own and sleep well at night. I bought some in 2009 and added during Covid lockdown. Dividend keeps compounding and DRIP just "forces" you to buy one of the best companies in the world bit by bit.
Great story for stockholders over the last 10 years. Alas, they have achieved this success by squeezing franchisees, and ultimately the end-customer with the ridiculous menu prices we are seeing currently.
Will be curious how things shake out over the next couple of years.
Youâre right this is an important point. This model only continues to work if people keep coming to the stores and franchise owners keep making money themselves.
I canât speak to prices in other places (Iâve seen the videos online but not sure how much is exaggerated or specific to certain locales) but where I am prices have gone up but itâs still one of the more affordable places to go
@@mattderron - I just happen to have a friend that closed five restaurants because of the shrinking margins remaining after corporate took their cut. He also has a couple of sit-down restaurants like a Chili's or Applebee's seeing better performance because they are already working to get people back in the door. Will be interesting to see if MCD can do the same without having to suffer to much of a stock price hit.
As a consumer, MCD only makes sense price wise if you use the app and get the free stuff and deals. If you are paying straight up menu prices it is a ripoff.
@@livefree223 you hacked their two tier pricing system. đ
IMHO, MCD is a decent dividend stock. Its performance since the pandemic has been poor, but that is the case for many companies in that sector. And more recently, inflation has also hurt that sector. If you take a look at the last 10 years (EOY 2013 to EOY 2023), the stats show it has outperformed the S&P 500 index ETF, VOO. However, so far, this year for 2024, VOO has vastly outperformed MCD. Its capital appreciation CAGR over the past 10 years has beaten VOO. However, its dividend CAGR is only comparable to VOO's. How the stock will perform in the future is anybody's guess (like all stocks). I would rate MCD as a hold at this time.
I was worried that increased minimum wages ($20/hr now in California) would impact MCD but from your explanation it looks like that burden falls more directly on the franchisees, who aren't happy about the $5 meals either.
CorrectâŠ.ultimately though if prices rise and people stop going then yes it will ultimately impact them. But to a lesser amount because theyâll still get them their rent and fees but a smaller royalty cut. StillâŠthe whole model works because the franchisees are successful. If they end up not being then it will be a problem obviously
McD's has been miving toward the self checkout which excludes minimum wage employees for years now. That and online ordering has drastically reduced what would have been labor costs.
For sure the app and kiosks have continued to be a bigger part of their sales. Not sure if thatâs true everywhere but definitely where we are
Self-checkout kiosks are also quite common in the MCD over here in Asia! And as far as I can see, the MCD here in Asia are still quite packed with customers all the time. (I am new to your channel - love your MCD analysis. Just subscribed!)
Living in California MCD is close to pricing me out, I guess I could sell one share of AAPL for a Big Mac, fries and drink. đđđ„€
Yes Iâm curious to see how that plays out for California franchise owners over a longer term
@@mattderron Matt, the price increases since the 20 buck a hour minimum wage was implemented has been startling, even sit down restaurants are getting in the act, Chiliâs (donât kill my food choices people!!) â3 for $10.99â deal is now $14.99 here. Dominoâs on their coupons has âCalifornia pricing moreâ damn!
Thatâs insane. Weâve definitely noticed prices increasing where weâre at (Texas) but not that dramatically. For us those a âsit down dinner outâ is easily $100 at like a TXRH or something. MCD is $30-40 so itâs definitely a lower cost option. Plus we do use the app and get it cheaper or free stuff. StillâŠIâm not sure how any restaurant that leans on âaffordabilityâ will be able to handle the $20/hour requirement
McDonaldâs seems more like a REIT since the money comes from the land that was bought by someone else to use the brand on that land so basically McDonaldâs has a custom feudalism where McDonalds Corp is the golden arch crown, followed by the franchisee is a lord without the ownership part, then the McDonaldâs manager and in military terms is more of a sergeant in charge of making the lowest group which are the workers that own nothing and interact with the customers the most and get paid the least. After quickly explaining the hierarchy of McDonaldâsâŠ.McDonaldâs Corpâs job is pretty much maintain a brand to attract customers that they donât directly interact with for revenue. Franchisee job is to handle the liabilities of owning a restaurant as well as having managers handle the minor details, the managers job is to handle the day to day operations and the workers working in the fine details from cash register to flipping the burgers and cleaning the place.
Honestly owning shares of McDonaldâs or being part of McDonaldâs Corp seems to be the best position to be in regards to building wealth. Franchisee seems to get the 3rd or middle bucket for wealth and the rest down below get dollar menu like wages or so it seems that way and this doesnât include any 3rd party or logistics that play a role in a single location
Cash app said you can start investing in McDonald's socks for a $1.00, is that true? I'm new to investing let me know. Thanks, steven
Yes itâs with fractional shares. They basically split the share amount based on how much youâre investing
Have you looked at ULTA
I looked at them briefly when they were around $445 but decided LULU was the more exciting opportunity due to margins and growth. But then ULTA went sub $400 and I thought I should look at it again but havenât gotten to it yet
I never get bored going to Mcdonalds, always like it over other burgers, they are affordable
we feel the same about it lol
Iâll always love McDonaldâs, will always spend money there. And Iâll buy more stock regardless.
It's a buy/hold simply because if it becomes a race to the bottom, McDs will always offer the best value compared to competitors
I dont understand the logic of selling a stock just based on 1quarters bad data. So if every company retraces 20%, am i going to sell them?!? I dont find a rational to sell sbux at this level.
I explained my reasoning for selling SBUX in my video about them. I didnât sell MSCI or AAPL or many others when they went down double digits. Itâs not about âselling because itâs down 20%â
If youâre not planning on selling any time soon and want a solid buy and hold stock to collect dividends for the next 20 years. Go ahead and buy whenever.
+ their geographical scope, they operate in more than 100 countries
yup definitely
they will always have someone on the drive through .
i got a large ice coffee 2 Mcchicken for $5.4
Nice! Sounds like a pretty good deal to me. I actually enjoy their coffee more than SBUX
In Germany Mcdonalds employees are very rude, dont speak the language and get the orders wrong often.
Buy it for my Grandkids
I'm lovin' it - if it gets below 230 a share
The question you should ask, do people still love Mcd?
I think McDonald's and Starbucks will be fine.
Me too. Big MOATs. They will dig into their archives of institutional knowledge, refocus on what made them the #1 player in their respective fields and flex the 900 pound marketing muscle. But if they donât (like Kmart or Blockbuster), I am agnostic as to where my total portfolio return comes from. Diversification will do its work.
Sell , short. Big mac trios 15$, business gonna go south real quick
I don't appreciate the $SBUX hate, it was 1 bad quarter wait a little bit before using them as a stepping stone to justify how "good" $MCD is. I think $MCD is a good business, but using a business currently doing poorly to justify buying another is not a legit justification...
Iâve held MCD since 2022. My buying them had zero to do with SBUX just like me holding them has zero to do with SBUX now.
I explained my reasoning on SBUX in my video about them. I compared the two because multiple people asked me my thoughts on MCD vs SBUX.
@@mattderron ah makes more sense, came off a little differently to me. Thanks for the clarification Matt.
That thumbnail looks miserable
lol not a real picture. The wonder and magic of AI đ
Aren't you afraid their China stores might get into trouble with the increasing global tensions? I see 5000 stores in china, that is > 10 % of all their stores worldwide.
it's a concern (same with any company with a lot of business there) but ultimately in those regions I think they're even less involved (mostly royalty only revenues) is my understanding
Nope it is not, and neither itâs Starbucks.
Depends on what your goals are, but I hear you lol
@@mattderron $18 for a burger, fries, and a drink? Taking a family of 4 thatâs almost an $80 meal. For that type of money I rather take my family to an actual sit down restaurant and still have better and much healthier food.
Not sure where you live but itâs $30-$40 for our family of 4 here. Still very affordable compared to everything else
The franchise fees are killing the company and have reached their limits. Bad investment.
Donât buy ! I work in MCD and lately this year everything upside down. They really need to replace the management !
An appropriate song for this McDonalds topic:
youtu. be/xyiwJBsvLSE?si=VZZ74xO_YkaEJFap