McDonald's Investors Loving It, Relatively Speaking

With the Dow off over 300 points on a slew of worries this morning, investors in McDonald's Corporation MCD are lovin' it this morning, relatively speaking. The Oakbrook, Ill-based company reported a 5.1% increase in July same-store-sales this morning, as smoothies helped the U.S., and the boom in breakfast sales help in Europe. For stores open at least 13 months, sales rose 4.4% in the United States, 5.3% in Europe and 4.0% in Asia/Pacific, Middle East and Africa. "McDonald's continues to deliver great tasting, high quality food at an outstanding value to a growing number of customers around the world," said McDonald's Chief Executive Officer Jim Skinner. "We're creating a unique McDonald's experience that is welcoming our customers into modern restaurants with convenient hours and locations and offering more choice in food and drink options than ever before." It's no secret that the U.S. is slowing, with weak economic data in the past few months. If the equities market continue to fall much further, you will start to see a slowdown in consumer spending again, like we saw in 2008 and 2009. Companies like McDonald's MCD, Dollar General DG and other cost sensitive type names will outperform other retail names. McDonald's has continuously beaten competitors like Wendy's WEN, Burger King, and others at the fast food game. It has turned around its menu from just burgers and fries to a place where people actually want to go for decent food at a reasonable price. Jim Skinner and the rest of his management team have done a wonderful job over the year transforming the image and creating incredible shareholder value. Last week, the company was profiled in Bloomberg, as it tries to compete with Yum! Brands YUM in China. As one of the few companies hiring in this country, McDonald's appears to be in stable shape to handle any kind of economy: boom or bust. McDonald's trades at 15 times forward earnings and sports a 2.8% dividend yield. With 2.8% much more than a 10 year U.S. Treasury, McDonald's shares continue to deliver one of the better values in a market that is desperately seeking a safe haven offering growth. It may not be growing like Apple AAPL, but investors need someplace to put their money. It might as well be under the Golden Arches. ACTION ITEMS:

Bullish:
Traders who believe that McDonald's will hold up better than the broader markets might want to consider the following trades:

• Buy McDonald's on weakness. This is very good news for McDonald's, with strong growth coming in China and continued better than expected numbers around the world. McDonald's is one of the highest quality stocks in the United States, rising 23% over the last year, and offering a 2.82% dividend.

Bearish:
Traders who believe that nothing is safe in this environment may consider alternate positions:

• If McDonald's can not be a safe haven in this environment, then perhaps nothing can. We could see a massive whoosh down in all equities, and McDonald's would certainly be hit if this happens.

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