When you read reports indicating that correlations are falling, and the time of the stock picker has returned (said in the voice you hear during movie trailers) you can believe it's true of the restaurant industry. During the crisis, correlations rose as macro events made stocks rise and fall together due to FX, interest rates/Fed policies, and legislation. Actual company performance was less important than normal and the traditional stock picker found it hard to outperform the benchmark.
As the Fed pulls back from its extraordinary stimulation efforts (or as the market looks past that unwinding) the factors that will matter are old fashioned stuff like earnings trends, the competitive landscape, M Speaking of old fashioned, we take a look at the granddaddy of fast food restaurants, McDonald's Corp. (NYSE:MCD).
Looking at the restaurant sector gives you a taste of how hard the stock picking game actually is even in a bull market. If you chose Wendy's Co. (NASDAQ:WEN) or Jack in the Box Inc. (NASDAQ:JACK) as your exposure you'd have made around 85% over the trailing 12 months (who said burgers can't be sexy?). If you picked the old staple, McDonald's, you'd have returned 2.9% barely beating inflation. The twoyear return for MCD is actually negative, as the below chart highlights.
Source: Thomson Reuters Eikon But if death, taxes and mean reversion are normally reliable let's look at the isabel marant sale outlook from here.
Are you lovin' it?The market is clearly assuming Ronald's best days are behind him. The company is now offering a significant 3.4% dividend yield, the best in the class and the lowest P/E, aside from Cracker Barrel, which has had a troubled 12 months. (NYSE:CMG) at 23.5% makes you wonder at the wisdom of the original spinoff and even the peer median is forecast to hit a racy 17.5% growth rate.
It's a long race though and where the market often starts to assume very little in the way of longterm EPS growth that's when opportunities can emerge. Put another way, you don't http://www.isabelmarantsa.com/ make money buying the highgrowth stock, if the market already anticipates it's going to deliver that high growth. So what's priced in for MCD at current levels?
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