Techquity
Technology Investor, Fundamental Research
McDonald's looks attractive in one of its largest drawdowns ever, with its highest dividend yield in 11 years and its lowest P/E in six years. It was appealing at $247 and is a stock to commit to at $239. x.com x.comÂ
McDonald's is trading at its highest free-cash-flow yield in a decade, outside the COVID crash. x.comÂ
McDonald's remains a little too rich at 20x earnings for mid-single-digit growth, even though it is one of the best businesses ever created and will probably be around in 100 years. That holds despite its second-worst drawdown in 20 years, down 23.6% from its highs, per Fiscal.ai. x.comÂ
McDonald's franchise model lets it collect twice on every sale while franchisees supply the capital, pay workers and manage food costs. Franchisees pay an initial fee, rent with a sales-based component and sales-based royalties, which brought $16.55B of franchised revenue last year. McDonald's is essentially the toll booth on the highway to fast-food profits. x.comÂ
McDonald's is basically a REIT, so dips like this are good buying opportunities for a long-term portfolio. The stock is 24% below the all-time high it set just a few months ago and trades near a two-year low. x.comÂ
McDonald's has turned from a growth equity into a bond proxy, a vicious cycle as Treasury yields rise. Per @The_Prophet_, yields moving from about 4% toward 5%+ raise the discount rate on its slow-growing cash flows, give income investors a risk-free alternative, and pressure its capital-intensive franchise system. Investors forget McDonald's shares were unwanted in the mid-2010s. x.comÂ
McDonald's business isn't stressed even though its chart is. The stock sits below its 200-week EMA, with momentum starting to turn bullish. x.comÂ
McDonald's is the most obvious buy: its RSI is at levels unseen since 1974, and with bearish headlines on an already beaten-down price, there is little room to get more bearish. Fear articles and downgrades are institutions pushing the price lower so they can load up. This company has survived every recession, crisis and panic for 50 years, so RSI this low on a company this safe makes it a generational entry to build patiently over time. x.comÂ
McDonald's shares keep falling because the consumer is not doing well, with disposable income at lows. The stock briefly dipped below $250 before rebounding to $251 and remains near multi-year lows. x.comÂ
McDonald's could draw buying from older investors or a broader sector rotation. The biggest concern is that it is not yet a buy on the chart, as it is not yet trading at a 10% discount to the lowest Street price target. x.com x.comÂ