Wednesday, September 8, 2010

McDonald's Update: Selling on the Bullish Commentary

A brief note on MCD. Two weekends ago I did a post titled Chubb and McDonald's Suggest Leadership for Next Bull Move in Stocks two companies as among a group of strong multinationals that could lead the way in a new bull market, or a bull move in what I believe to be at best a chronic stagnant stock market. Both stocks have moved up both through the August downturn and again in the up-move after the late August bottom, and are now moderately extended versus each stock's own moving averages. Thus they are at least in a mini-way momentum stocks. In that context, I did not like the headline today about MCD found on Yahoo!'s Finance section:

Analysts: high hopes for McDonald's sales figure
Analysts: McDonald's sales figure to rise faster than industry

THE OPINION: UBS analyst David Palmer expects August revenue at McDonald's restaurants open at least a year to rise higher than the 4.5 percent analysts expect on average. Industrywide, the figure rose 1.5 percent to 2 percent last month, he told clients in a note Wednesday.

Having earlier in the day sold covered calls on some of my MCD shares, I sold the rest outright on that headline given the recent superior outperformance of the stock, general distaste for the stock market overall, and the premium valuation of MCD vs. other high quality stocks. (I also sold some MCD yesterday to buy Chubb on CB's price weakness.) Bullish headlines "reporting" bullish opinions before the fact smack of takedowns unless the news is outstanding. True long-term investors can ignore this sort of stuff. Let's see what happens tomorrow.

Of course, none of this commentary is other than commentary and is not investment advice of any sort.

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