I bought some McDonald’s
(MCD ) stock today.
Loyal readers know that I am a fervent believer in the
efficiency of markets and therefore in buying index funds, rebalancing
with the religiousness of the Pope,
and not making the slightest attempt to call the markets or individual stocks;
see INDEX INVESTING: “YOU (DON’T) GOTTA HAVE HEART…”, 8/21/14 . However, old habits die hard. Consequently, I do trade a little bit of
money, mainly to amuse myself and keep myself focused for my writing endeavors,
which I also engage in primarily to amuse myself.
With that disclaimer behind us, why did I buy McDonald’s? The stock has really been beaten up lately;
it reached a year to date high of $103.53 on May 13. It has since traded down 10.2% to the $92.99
at which I bought it. The S&P in
that time period is up 5.7%. MCD
pays a quarterly dividend of 81 cents, which works out to a dividend yield of
3.48%, more than 100 basis points over the ten year treasury.
Why is MCD down? Despite what the financial media and most of Wall
Street would have you believe, no one knows. But those who make a living opining on the
unknowable tell us that MCD is down because
the millennials don’t like
McDonald’s (Who does like McDonald’s…the food, not the stock? But I digress.), the competition in the fast
food business is too much for McDonald’s, and that the pressure for a higher
minimum wage that is supposedly sweeping the country will be bad for MCD .
As a believer in efficient markets, yours truly doesn’t pretend to know why MCD
is down, though I suppose I could guess as well as the people who are paid a
lot of money to make such guesses. What
I do know from years of experience, though, is that when the stock of a great
American company is down as much as MCD, it is time to consider
buying. When that same stock pays a
healthy dividend and has made no indication that that dividend is in danger, it
is time to take an even closer look. When
the reasons advanced for the stock’s having arrived at such a seemingly
attractive valuation sound like they could only come from people who know
little of life beyond the caverns, usually figurative, but often literal as
well, of Wall Street, it’s time to
put one’s money to work.
That is why I bought McDonald’s. Was I early?
Will I prove prescient or foolish?
I don’t know. But, as with football, having a little skin in the
game makes watching more interesting.
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