Dunkin Brands Group Inc (DNKN): Why McDonald’s Corporation (MCD)’s Pullback Is The Perfect Buying Opportunity

The company reported sluggish results during the second quarter, resulting in the stock sinking to technical support. However, the 58-year-old company is undergoing an extensive remodeling effort to make its restaurants friendlier and a popular hangout destination.

In my recent article on Dunkin Brands Group Inc (NASDAQ:DNKN), I referred to these types of changes as the Starbucks Corporation (NASDAQ:SBUX) effect. Not only is McDonald’s Corporation (NYSE:MCD) rehabbing the look and feel of its stores, but the company is adding fresh new products. For example, McDonald’s Corporation (NYSE:MCD) is now testing lobster rolls as part of the menu in certain markets. Yes, lobster at McDonald’s Corporation (NYSE:MCD)! This would have been inconceivable just a few years ago.

Boasting a tremendous market cap of more than $94 billion and offering a forward annual dividend yield of 3.2%, the company is well positioned to weather the temporary lackluster quarter. In addition, nearly 65% of shares are held by institutions, which points to the internal strengths of the company.

Risks to Consider: As the biggest player in the fast-food industry, McDonald’s is constantly under attack by other major burger chains, as well as smaller upstarts. In addition, market risk is high with the Dow’s sensitivity to the overall economy. Always use stop-loss orders and position size properly when investing.

Action to Take –> I like MCD right now with a stop-loss below $90 and a 12-month target of $101. The technical pullback, combined with the menu and restaurant improvement, should work over the long run to get the stock back on track.

P.S. — Chances are you’ve eaten at McDonald’s Corporation (NYSE:MCD), but have you ever considered investing in the company? Stocks like McDonald’s Corporation (NYSE:MCD) are similar to a special group of securities we call “Forever” stocks. These are world-dominating companies that pay investors a sizable dividend, dig a deep moat around their business to fend off competitors and buy back massive amounts of stock, boosting the value for the rest of the shares. They’re solid enough stocks to buy, forget about and hold “Forever.” To learn more about these stocks — including some of their names and ticker symbols — click here.

– David Goodboy

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