McDonald's (MCD) is about to do what it's done for 15 years.
I have a much smaller position than I would like. (Not a lot. I would have more if I didn't have other high conviction plays to fund) **Not a financial advisor,** but my money is where my mouth is.
Pull up the 15-year quarterly chart. Pretty much every time McDonald's has had two red quarters in a row, it spent the next two quarters surging to new all-time highs. On the rare occasion it didn't, it went red one more quarter, then hit new all-time highs within a year anyway.
Where are we now? MCD hit an all-time high of \~$340 in February, then went red in Q2 and red in Q3. It's sitting around $250. That's $90 off the top (\~26%) and right on top of the 3-year low. It didn't even quite touch the 3y low. That looks like support to me.
So there are two outcomes. Either A) the surge starts this quarter, like it usually does, or B) it goes red one more quarter, then recovers fully anyway.
Sure, there's a third outcome where McDonald's falls apart completely - Doesn't sound realistic to me.
Why would this time be different? The business didn't break. U.S. sales slowed because franchisees botched the value menu rollout, which the CEO admitted on the earnings call. They've already replaced the head of McDonald's USA, and a value revamp is coming. Nine months ago U.S. comps were +6.8%. Meanwhile, they just raised the dividend for the 50th straight year, and international is growing.
My targets: a return to all-time highs, around $340, by the end of Q1 2027. That's the $90 back, or about 36% from here. If it takes the extra red quarter, that moves to Q2/Q3 2027. You collect a 3% dividend while you wait.
This is McDonald's. It's not exactly a stretch to imagine the pattern holds.
I'll update this post incrementally when relevant, but it could very reasonably hang out in the $240s-$260s a little longer before making its move. I really am not expecting a third red quarter, but I would relish the chance to buy MUCH more at an even lower price.
**Update 1 - 1 day later** Most of you probably didn't buy yet, but it looks like a great chance at an even better price today. $230's at play now. I'm gonna be scooping up as much as I can every drawdown, because like I originally stated, my thesis here is over multiple quarters.
Update 2 - 2 days later. I have to admit, it's really funny I called the buy 1 day before a 5% pullback, but, for what it's worth, I bought as much as I could yesterday, and I hope you did too. Made me feel better about MCD, not worse. Today is looking a lot more compelling.
Update 3 - 7 days later - This might be the last chance in the $230s. But... what do I know? :)