I'll admit the headline is a bit deceptive. On one hand McDonald's (NYSE: MCD) has seen a resurgence in its business and frankly, the shares have done very well. In fact since McDonald's went through its own set of problems five years ago, the stock has since tripled in value.
The parallels between Starbucks (NASDAQ: SBUX) and McDonald's are very eerie. Starbucks has hit the proverbial wall after a successful ride from 1992 to 2007 as one of the premier GameChanger stocks around. Starbucks, like McDonald's over-expanded its store base in the United States and began to cannibalize its own revenues. Starbucks, like McDonald's, lost its principle focus and did not tend to 'what got them there".
In late 2002 McDonald's stock had just finished a 4 year run of losing 70% of its value. The company was becoming a hodgepodge of different menu items, culminating with the disastrous release of the McLean Deluxe, which was not even all beef! Advertising and marketing programs were a mish-mash of geographical themes yielding no consistency whatsoever. McDonald's even posted, for the first time in its illustrious history, an operating loss in 2002, and experienced negative same store sales for the first time, as well.
Then CEO Jim Cantalupo said enough was enough. McDonald's closed 700 unproductive stores (sound familiar?) and re-focused its menu and advertising campaign.
Starbucks (NASDAQ: SBUX) indicated plans to close 600 unprofitable domestic stores and incur pre-tax charges of $328-$348 million, including asset write-downs of $200 million.
Deutsche Bank says: "With US consumers still reeling and McDonalds (NYSE: MCD) on the cusp of a nationwide specialty coffee rollout, it is too early to call a bottom on fundamentals – maintain Hold."
SBUX July option implied volatility of 42 is near its 26-week average of 39 according to Track Data, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
The most impressive game-changer story in the fast food industry over the past 50 years is indisputably McDonald's (NYSE: MCD). Founder Ray Kroc was a visionary and pioneer in serving customers hot fast food at a reasonable price. Thirty thousand units later, McDonald's is still a growth story. But the better growth story is Chipotle Mexican Grill (NYSE: CMG), so much so, in fact, that McDonald's was an early investor in Chipotle! (McDonald's no longer owns shares of Chipotle.)
McDonald's went through some execution issues in the mid-1990s through 2003. The fast food industry was taking some hits from nutritionists, and the quality of food was suspect. McDonald's re-tooled its entire operation from store front to menu offerings. The standard hamburgers and those delicious french fries are still on the menu, but McDonald's has added a variety of salads, wraps and other healthier options. In the past five years the stock has nearly tripled in value, validating McDonald's make-over.
Chipotle, founded in 1993, has not had to re-tool or redefine itself. The freshest of ingredients, naturally raised poultry and beef are highlights of the limited, but superb menu. Chipotle is a favorite of almost every demographic group, from teenagers to the elderly. Chipotle has succeeded in offering the finest fresh Mexican food, but not at the cheapest price. The average ticket at Chipotle comes in near $9. The company recently raised prices at different levels depending on geography. Sales have not slowed a bit in spite of the price increases.
Yesterday could have been the end of the NBA season, but the Los Angeles Lakers forced a game six in Boston -- not so much by winning; more by having a "refuse to lose" finish that they could not muster before. I am quite sure David Stern is fine with that outcome. ESPN, and ABC television owned by Walt Disney (NYSE: DIS) must be ecstatic. The NBA officials will earn another paycheck, and the sponsors? They are praying for a game seven for sure!
Yesterday, prior to the game, I posted Sunday Funnies: Lakers/Celtics -- NBA business success, and dedicated much of the word flow to all the clamoring about NBA officiating and reasons why the game had issues. Today is all the about the cash.
While the Super Bowl is the hugest of events, an NBA Finals is a saga with twists and turns, and this one so far has had many. The Lakers face insurmountable odds of winning two games in Boston so they have been as much as counted out already.
Laker star and NBA Most Valuable Player Kobe Bryant has posed the most interesting perspective on the challenge his team faces that I can ever remember. He said, prior to the game, that since he did not go to college he viewed his situation like making the Elite Eight referring to Division I college basketball March Madness. He said, you just have to feel grateful you are there and know that you have to win three games to win the tournament.
5 Stocks Dad Will Love Forget ties. For Father's Day this year give him something of real value -- shares of some great companies that make products men love. They include O'Reilly Automotive, The Stanley Works, Diageo, Dick's Sporting Goods and Best Buy. 5 Stocks Dad Will Love - Kiplinger.com
Is Water the New Oil? By 2030 nearly half of the world's population will inhabit areas with severe water stress. In the coming decades, as growing numbers of people live in urban areas and climate change makes some regions much more prone to drought, water -- or what many are calling "blue gold" --will become an increasingly scarce resource. Billionaire T. Boone Pickens thinks water is the new oil -- and he's betting $100 million that he's right. If he's right, T. Boone Pickens is a modern-day John D. Rockefeller. Pickens owns more water than any other individual in the U.S. and is looking to control even more. There Will Be Water - BusinessWeek
It's hard to believe these days, but at one time Burger Chef was the number two fast-food burger chain in the United States, second only to McDonald's (NYSE: MCD). Its easy to forget as well that Burger Chef pioneered many of the things that its rivals became known for, including flame-broiled burgers, value combo meals, and a works bar that allowed customers to dress burgers their way.
Burger Chef had cartoon mascots, including the Burger Chef (voiced by Paul Winchell) and his sidekick Jeff, Count Fangburger, Burgerilla, Cackleburger and others. In the early 1970s, the company also offered a "Funmeal" with specially printed packaging and accompanying toys or puzzles. Burger Chef sued McDonald's after it introduced the Happy Meal in 1978, but ultimately lost.
Burger Chef offered a fish sandwich and fried apple or cherry pies. Some locations offered tale-side service, and others had windows that allowed customers to watch sandwiches being made. Burger Chef was also an early adopter of the media tie-in, with the Batman television series and the original Star Wars movie in the 1970s.
Three types of raw tomatoes -- red plum, red Roma and round red tomatoes -- grown in 17 states are voluntarily being pulled of the shelves and menus of McDonald's (NYSE: MCD), Wal-Mart (NYSE: WMT), Burger King (NYSE: BKC), Kroger (NYSE: KR), Outback Steakhouse, Winn-Dixie (NYSE: WINN) and Taco Bell, among others. In fact, "McDonald's has stopped serving sliced tomatoes on its sandwiches as a precaution, but will continue serving grape tomatoes in its salads because no problems have been linked to that variety."
Similarly, Burger King, Yum Brands Inc. (NYSE: YUM) restaurants, Darden Restaurants (NYSE: DRI), and Chipotle Mexican Grill Inc. (NYSE: CMG) have also removed the contaminated brands from their menus across the U.S., and some, like Burger King, in Canada, Puerto Rico and some other Caribbean islands as well. Many left the non-contaminated brands on the menu.
Bankruptcy Odds Watch What are the odds that General Motors will have to file for bankruptcy by the end of the year? 30-in-1. What about American Airlines? 2-in-1. Check out 24/7 Wall Street's Bankruptcy Odds Watch on 10 popular companies and what the odds that Northwest, United Airlines, Wachovia, Ford Motor and more will file for bankruptcy. 24/7 Wall St.: The 24/7 Wall St. Bankruptcy Odds Watch
Small Companies, Big Brands Take a look at 10 overachievers that became breakthrough success stories. See how they made their products a household name. They include Ciao Bella, Clif Bar, John Fluevog Boots & Shoes, Pirate's Booty, The Republic of Tea and more. Small Companies, Big Brands - BusinessWeek
After the 3G iPhone was finally announced Monday, with a price tag and a business model that could take the funky phone to the masses, Apple Inc. (NASDAQ: AAPL) ended lower on some profit taking. But have no fear. Already this morning, Citigroup raised Apple's price target to $287 from $248 with a Buy rating, and Lehman raised it to $234 from $202, maintaining its Overweight rating. Despite the stock trading higher in European markets, it's still not showing signs of recovery in premarket trading in the US.
ThinkPanmure initiated Intel Corp. (NASDAQ: INTC) with a Buy, claiming it is gaining market share over rival Advanced Micro Devices (NYSE: AMD). The analyst also said Intel is gaining prominence in the server, desktop and notebook markets.
Hewlett-Packard Co. (NYSE: HPQ) updated its desktop and notebook computers. It introduced Tuesday in Berlin a new ultra-thin portable, the Voodoo Envy, to rival Apple's MacBook Air. H-P also added a new version of a touch-screen desktop PC and 16 notebooks for consumers and businesses.
McDonald's (NYSE: MCD) shares are trading higher after the company reported that May same-store sales rose 7.7%. Overseas sales were strongest, but US sales rose by 4.3%, while analysts expected only 1%. The company claims its low prices actually boosted sales during the economic slowdown as people flocked to cheaper alternatives. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MCD.
After hitting a one-year low of $46.64 in August, the stock hit a one-year high of $63.69 in December. MCD opened this morning at $58.37. So far today the stock has hit a low of $58.00 and a high of $59.56. As of 12:45, MCD is trading at $59.19, up $2.24 (3.93%). The chart for MCD looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. This particular trade will make an 8.7% return in just three and a half months as long as MCD is above $50 at September expiration. McDonald's would have to fall by more than 15% before we would start to lose money.
MCD hasn't been below $50 since September and has shown support around $58 recently. This trade could be risky if the company's earnings (due out in late July or early August) disappoint, but even if that happens, this position could be protected by the support the stock might find at its 200 day moving average, which is currently around $57 and rising.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent controls a bullish hedged position in MCD.
Top 5 Fast-Growth Stocks These are stocks of companies that are projected to increase revenue and profit by at least 12% in the coming year and rank near the top all stocks rated by TheStreet.com. Making the cut are CVS Caremark, DeVry, American Ecology, Balchem and XTO Energy. Top Five Fast-Growth Stocks: CVS - TheStreet.com
Is the American Dream Dead? Work hard, play by the rules and tomorrow will be better than today. That implicit promise has been at the core of the American Experience through good times and bad. But now, whipsawed by plummeting home values, $4-a-gallon gas, rising food prices and gyrating financial markets, Americans increasingly fear that the national bargain has unraveled, that their once-steady march toward affluence has derailed. So is the American Dream dead? Economy squeezes the American Dream - USATODAY.com
Microsoft Corp. (NASDAQ: MSFT) is getting out of the book-scanning business, an admission the software maker made late last week. Just like competitor Google, Inc. (NASDAQ: GOOG), Microsoft wanted to bring entire libraries into the digital realm for customers. The only problem is this: Google's online business is extremely profitable, while Microsoft's is not.
So, out go the boat anchors and what will survive will be the projects best suited to compete head-to-head against Google. Microsoft said that digitizing the world's books to make them searchable online "no longer fits with the company's plan for its search operation."
Is this a sign that Microsoft is becoming choosier in its battles with Google? Of course it is. The "me too" stance the world's largest software company has taken for quite some time can't last forever. Shareholders may demand profits outside Microsoft's Windows and Office franchises at some point, if not right now. At least Ole' Softie did not anger book publishers, since its book-scanning efforts centered on publications already in the public domain; Google's efforts have centered on anything published, regardless of copyright.
Back in the early 1920s, J.R. Simplot started a business in Declo, Idaho -- he raised hogs. He was 14-years old. Ultimately, he went on to create the Simplot Company, which is now a multi-billion dollar enterprise.
Yesterday, Simplot died of natural causes; he was 99.
He lived his life to the fullest and it seemed he had limitless energy. During World War II, the Simplot Company was the largest seller of potatoes in the U.S. and, of course, a major supplier to the troops.
Simplot also was incredibly innovative. For example, when there was a fertilizer shortage in WW II, he created his own facility to deal with the problem. Then, by the late 1940s, he helped to invent frozen french fries and would help usher in the fast-food revolution. By 1967, he made a hand-shake deal with Ray Kroc, the founder of McDonald's (NYSE: MCD), to supply french fries.
Even though he retired in the early 1970s, Simplot remained busy. He provided startup capital to computer chip maker Micron Technology (NYSE: MU). The company now has a market value of $6.2 billion.
Despite all the success, Simplot remained humble and thrifty – just like another billionaire, Warren Buffett. Simplot would fly commercial, had an ordinary car and wore the same pair of glasses for thirty years. And of course, his favorite restaurant was McDonald's.
The Associated Press reports that 99 year old billionaire J. R. Simplot died of natural causes after a life shunning cigarettes and alcohol. Although much of his $3.2 billion estimated net worth came from a deal he struck with McDonald's (NYSE: MCD) to supply potatoes for its french fries, he also made some money in semiconductors -- providing $1 million in capital for a 40% stake in Micron Technologies (NYSE: MU).
That Micron stake connects me -- however distantly -- to Simplot. That's because on June 22, 2006, Micron acquired Lexar Media, a maker of flash memory chips, for $850 million. I was an advisory board member of Lexar and received cash for my stake. Micron, which generates most of its revenues from Dynamic Random Access Memory (DRAM) chips, thought that Lexar's flash memory would help boost its margins by expanding Micron's then-developing memory card business. Unfortunately, Micron's stock has lost 22% of its value since the deal.
But Micron was not the biggest part of Simplot's fortune. He left home in 1923 with $20 worth of gold coins from his mother and traded up. His businesses, still family owned, manufacture agriculture, horticulture and turf fertilizers; animal feed and seeds; food products such as fruits, potatoes and other vegetables; and industrial chemicals and irrigation products. He all but invented the first commercially viable frozen french fries in the world.
Call it one of the smartest decisions in food retail this year. McDonald's (NYSE: MCD) will not pass on the cost of most food commodities to its customers. It will keep most prices on its menu where they are today.
According toReuters, McDonald's "is willing to absorb some of the higher costs for ingredients such as oil, meat and dairy to promote customer loyalty," Chief Executive Jim Skinner said. The company won't let upward pressure on its products hurt its business.
Some may see the program as short-sighted, a move that will erode margins and hurt earnings for the next couple of quarters or more. But McDonald's has the financial strength to support the move. It may be a way for the chain to pick up market share as inflation takes a toll on its competitors. If it raises prices, McDonald's will simply look more attractive.
Look for McDonald's same-store sales to be better than the competition. It is giving consumers a real reason to stop by.
Douglas A. McIntyre is an editor of 247wallst.com and author of the Ten Stocks Under $10 newsletter.
I'll admit the headline is a bit deceptive. On one hand McDonald's (NYSE: MCD) has seen a resurgence in its business and frankly, the shares have done very well. In fact since McDonald's went through its own set of problems five years ago, the stock has since tripled in value.
Starbucks
This post is part of 
Yesterday could have been the end of the NBA season, but the Los Angeles Lakers forced a game six in Boston -- not so much by winning; more by having a "refuse to lose" finish that they could not muster before. I am quite sure David Stern is fine with that outcome. ESPN, and ABC television owned by 
This post is part of a series on some of the most memorable 
Back in the early 1920s, J.R. Simplot started a business in Declo, Idaho -- he raised hogs. He was 14-years old. Ultimately, he went on to create the 
and 
. He also operates 
Wal-Mart's launch of $20 slimming jeans will be a huge success
Why I spent some of my stimulus check on GE
Why the dollar will keep falling
