We recently compiled a list titled Jim Cramer’s Top 10 Stocks to Track for Potential Growth. In this article, we will look at where McDonald’s Corporation (NYSE:MCD) ranks among Jim Cramer’s top stocks to track for potential growth.
In a recent episode of Mad Money, Jim Cramer advised investors to hold onto their stocks, anticipating a rebound after the market’s downturn. This advice proved useful as the Dow rose by 484 points or 1.16% and the NASDAQ also climbed by 1.16%, indicating that selling during the market decline was not the best choice.
“Last week, I advised you to hold off on selling everything and just wait, as I believed that once the pain ended, we would see a rebound. The average investor saw gains, with the Dow up 484 points, or 1.16%, and the NASDAQ also climbing 1.16%. While it might not be a full recovery, it shows that selling into Friday’s downturn wasn’t the best strategy.”
Jim Cramer noted that the previous week was tough for economically sensitive and tech stocks, despite a mixed August employment report. This report suggested a balanced economic outlook, not too strong or weak, which initially seemed favorable for those hoping for Federal Reserve rate cuts. Despite this, Wall Street reacted negatively, shifting away from cyclical stocks to more recession-proof sectors like consumer goods and pharmaceuticals, with industries such as industrials and semiconductors being particularly affected.
Cramer observed that recession-proof stocks, such as pharmaceuticals and medical devices, have performed well recently but have seen significant gains, raising concerns about a potential correction.
“Today, recession-proof stocks like pharmaceuticals, drug wholesalers, and medical devices continued to perform well, which is dangerous as these stocks have seen parabolic gains and could be due for a correction.”
He highlighted that historically, when the Federal Reserve is about to cut rates, it signals a shift in investment strategy. With the Fed expected to ease rates soon, Cramer suggests investors consider moving away from recession-proof stocks and look into more cyclical companies that could benefit from economic stimulus. While investing in cyclical stocks during a downturn is challenging, the anticipated rate cuts could make these stocks more attractive. Cramer advises maintaining diversification but being ready to adjust investment strategies based on the economic outlook.
“Historically, when the Fed is about to start cutting rates, we know that it’s time to shift focus. With the Fed leaning towards easing and an expected rate cut next week, it’s time to consider moving away from recession-proof stocks and investing in more cyclical companies. While it’s challenging to buy cyclical stocks during a slowdown, anticipating that the Fed will boost the economy can make them strong investment opportunities. It’s important to maintain diversification but be ready to adjust as needed.”
Our Methodology
This article reviews a recent episode of Jim Cramer’s Mad Money, where he talked about several stocks. From there, we picked ten companies and discussed how hedge funds are investing in them. Finally, we rank these companies from those least owned to those most owned by hedge funds.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A cook in a busy kitchen assembling cheeseburgers for orders.
McDonald’s Corporation (NYSE:MCD)
Number of Hedge Fund Investors: 67
Jim Cramer discusses the concept of price versus value using McDonald’s Corporation (NYSE:MCD)’s recent decision to maintain their $5 deal as an example. He notes that while this may be relevant for McDonald’s Corporation (NYSE:MCD), it doesn’t necessarily apply to other businesses, particularly if they operate in different sectors. Cramer emphasizes that discounting alone isn’t a path to success.
“Now, let’s talk about the notion of price and value. Today, McDonald’s Corporation (NYSE:MCD)’s announced they’re keeping the $5 deal, but that’s not really the point. Are they even in the same business as you? I think we’re in a different business. You can’t discount your way to prosperity.
We want to focus on the guest experience and the total value proposition, including the quality of what we offer. We’ve seen consumers willing to pay a dollar or two more, sometimes even at parity with the recent accelerated price increases in fast food. They would rather have a fresh bowl of Mediterranean food than a traditional fast food meal.”
McDonald’s Corporation (NYSE:MCD) is a strong investment choice for 2024, thanks to its solid financial performance, strategic growth plans, and innovative customer engagement. Despite a small drop in comparable sales and some economic challenges, McDonald’s Corporation (NYSE:MCD)’s achieved around $6.5 billion in revenue for Q2 2024, showing it can maintain growth. McDonald’s Corporation (NYSE:MCD)’s “Accelerating the Arches” strategy focuses on menu innovation, digital upgrades, and competitive pricing, which supports its long-term potential.
A major growth driver is its McDonald’s Corporation (NYSE:MCD)’s Rewards loyalty program, which has rapidly expanded to over 150 million active members, enhancing customer retention. McDonald’s Corporation (NYSE:MCD)’s is also lowering prices to attract more customers and expanding popular menu items like chicken to stay ahead in the industry. With the stock valued at about 21 times forward earnings, McDonald’s Corporation (NYSE:MCD)’s growth plans, including expanding its global restaurant network through 2027, make it an attractive investment.
Carillon Eagle Growth & Income Fund stated the following regarding McDonald’s Corporation (NYSE:MCD) in its first quarter 2024 investor letter:
“McDonald’s Corporation (NYSE:MCD) faces several short-term headwinds. Lower-income consumers have been cautious with spending, as they are feeling the cumulative effects of inflation more than higher-income cohorts. As the low cost/ value player in fast food, McDonald’s has a customer base that skews lower income. Also, as an international company, McDonald’s is feeling negative effects from war and tensions in the Middle East, as well as softness in China.”
Overall MCD ranks 4th on the list of Jim Cramer’s top stocks to track for potential growth. While we acknowledge the potential of MCD as an investment, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MCD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article was originally published on Insider Monkey.