Without much fanfare> or flourish, fast-food icon McDonald's marked a milestone this week not a new historic number of burgers served, but an all-time high for its stock, now trading north of $70.
Aided by strong sales of smoothies and frappesglobal same-store sales up 7%, as well as a weaker U.S. dollar (over 50% of restaurants are located outside the U.S, shares are up more than 24% over the past 12 months.
Did Somebody Say McDonalds?
McDonald s (MCD) 30 years>
It might not be surprising now, but in early 2003 the company looked more likely to be kicked out of the Dow Jones Industrial Average than to lead it. While never having a position in the stock, I can distinctly remember dismissing it (back then) as the chain posted the first quarterly loss in its history and was besieged by, to quote the Washington Times, vegetarians, environmental groups, homosexual rights advocates, obese children and most recently, a 420-pound man who says [the company] wouldn't hire him because he was, well, 420 pounds.
Businessweek wrote of "McDonald s Hamburger Hell," as two teenagers sued the chain for making them fat. "The great American icon ain't what it used to be," lamented Fortune. A year later, the critical documentary Super Size Me was released. The stock sunk.
In hindsight, those abysmal headlines ended up being a great buying indicator. Over fits and starts and innumerable data points and statistics, the stock ultimately turned around and rallied, through 2003, 2004, 2005 and every year since until last year, when it was down just fractionally. The best traders and investors were those who were able to purchase shares way back then and had the patience to hold on for the ride.
That s exactly why, when it comes to portfolio management, you want to cut and prune, not slash and burn. When markets correct, emotion leads us towards all-or-none decision making. When you re looking to shed risk, tiny allocations of less than 1% of your portfolio, as well as losing trades, should be cut first.
The long winning stretch of McDonald s is one of the best examples why. While markets can often seem chaotic, they to tend to move in trends that persist over time.
At the time of writing, Hoenig s fund held positions in many of the securities mentioned.