iBooyah.com Investment Matters

This phenomenon occurs when a brand become so powerful that it is the first thing that comes to mind when a consumer considers a company in its sector.  For example, if one is asked to name a copy machine, Xerox would immediately come to mind.  Other example include web search where Google is the first brand you think of.  Having a “consumer monopoly” is important as it cements the identity of the brand.  Personally, I prefer to invest in companies that have achieved this level of penetration and status. As a long term investment, this is a great place to put your money (Long term is around 5 years).  The chances that you will win as a long term investment are greater than losing.  MCD is also one of those defensive stocks where people tend to buy when the economy is slowing.

McDonald's is currently trading at around $34.85/share on August 10, 2006.  Looking at the past two years of performance, the stock has been unable to break above $37. It hovers around $32 to high $36. If you decide to buy MCD, do not expect to make a killing.  The chances that the stock will hit $40 in the next 52 weeks are quite small.  In contrast, the chances it will go down to around $31 or $32 is much greater, in my opinion.

Getting back to answering the original question, is it a good investment? Yes, it is a very good investment because MCD is a recognizable brand and have proven itself over the years.  The question is at the current price, is it a good time to buy?  My view is the stock is too expensive at $34.85.  However, if the stock were to drop to around $29 or $30, it would represent a great entry point.  The next time some farmer reports a case of Mad Cow Disease, MCD will sell off. That is when you should pick up this stock.