There are good reasons to follow the Nasdaq Composite index and its top influencers in today’s market. But in a market made up of leading stocks, it would be a huge error to ignore McDonald’s (NYSE:MCD). Let’s see what’s happening off and on the MCD stock price chart and why it’s time to sink your teeth into a risk-adjusted long position.
Apple (NASDAQ:AAPL). Microsoft (NASDAQ:MSFT). Amazon (NASDAQ:AMZN). Alphabet (NASDAQ:GOOGL). Facebook (NASDAQ:FB). It’s a who’s who of large-cap technology. And it’s no secret Wall Street and consumers alike love them. Further, that enthusiasm has only grown during the novel coronavirus pandemic. The fact is, technology has helped businesses and people like you and me navigate the lock-downs and working from home.
Still, it would be a big mistake to think technology stocks are the only winners in all of this. The biggest proof of this may be large-cap peer McDonald’s.
MCD Stock on a 2020 Tear
The Dow Jones blue-chip stock and fast-food giant has been on a tear in 2020. Ever since Covid-19 plunged the broader stock averages into a historically roiling, but brief bear market into late March, shares of McDonald’s have surged nearly 80%. The stock has also hit new record highs. But that’s not all.
Despite September’s market correction which took the Nasdaq down 13% and proffered even larger valuation checks for its leading tech influencers, McDonald’s stock is less than 3% off from another all-time-high. And at its worst, shares were down just 6%. Now that’s leadership not worth disputing.
Of course, it’s not a form of mad cow disease which has Wall Street’s bulls buying McDonald’s.
Similar to their favorite tech toys, investors are heeding the timeless advice of legendary fund manager Peter Lynch and simply buying what they’ve been using or more aptly, consuming. Convenient drive-thru, click-and-collect and delivery options have been available throughout the pandemic at McDonald’s. And now many locations are also allowing dine-in services once again.
Ignore Valuation Warnings
To be sure, proof of McDonald’s success isn’t exactly baked into the past couple earnings releases. It’s the opposite. But given all the costs associated with McDonald’s successfully beating back the coronavirus, dire-looking bottom and top-line results shouldn’t be a surprise. Plain and simple, don’t be fooled by “worst in umpteenth quarter nonsense” or valuation warnings MCD stock is too expensive.
More importantly, the next time you’re on the couch watching Netflix (NASDAQ:NFLX), YouTube, mindlessly trolling Facebook for hours or in your Tesla (NASDAQ:TSLA) and in need of a quick bite to eat, appreciate that an order from McDonalds may be sitting next to you or on your neighbor’s lap. And trust me, when we’ve fully put the pandemic behind us, McDonald’s essential goods or goodies will prove bigger than ever.
MCD Stock Monthly Price Chart
Source: Charts by TradingView
If I didn’t know any better, I’d think the monthly price chart of McDonald’s stock was that of a hot tech company. But as mentioned above, MCD stock has demonstrated relative and absolute price strength above and beyond most of its blue-chip tech peers over the past six months. And those bullish trends look set to continue.
As the McDonald’s chart also reflects, shares have traded through and remain at new highs in September following a breakout of a year-ago’s all-time-high. It’s no small feat and deserves investors’ respect as a new rally led (again) by large-cap tech has emerged the past two sessions. Moreover, right now shares of McDonald’s look investable as part of a well-structured, risk-adjusted purchase.
Today’s recommendation on how to smartly buy McDonald’s stock is a simple one. Go to the options menu for MCD stock and order a collar to hedge the long delta position risk. Collars offer defined and reduced risk. The strategy also allows shareholders to take in income. It’s versatile too. Not only can collars be used flexibly to trade the trend, they’re also great for nibbling or even gorging on shares in those instances when others are caught upchucking in the street.
On the date of publication, Chris Tyler did not hold, directly or indirectly, positions in any of the securities mentioned in this article.
The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.