E.Coli making YUM! Brands (YUM) attractive
We believed the declined in YUM! Brands (YUM) in recent days represent an opportunity to buy. While the Taco Bell food poisoning incident that has been linked to green onion is a PR nightmare and an unfortunate event; the drop in YUM’s share is beginning to look attractive for long term investment. In the short term, this type of events will certainly have an affect on sales as consumers will think twice before eating at Taco Bell. One important thing to note is YUM! owns many other brands so the impact should be minimal.
This reminds me of the case with McDonald’s (MCD) and the beef industry. Every time a “mad cow” was discovered, MCD’s share would drop for fear that Americans would stop buying their burgers. In the short term, the stock was volatile, but eventually consumers came back and public trust was restored. Today, MCD is trading at all time highs. We believed YUM is in the same situation. Our recommendation is to sit back and wait for this stock to fall close to the low 50’s. That would be the ideal price to enter.
