Dow component McDonald's is underperforming the markets and its rivals. It may continue, say two strategists.
Unless you've been living under a rock for the past several months, you know the markets have had a great year.
One popular measure of the market, the Dow Jones Industrial Average, is up 22% year-to-date. However, one of its 30 components – McDonald's – may be up as well but it's lagging the Dow. The Golden Arches have gained only 8% so far this year. And, its performance has been sluggish compared to other restaurants like Wendy's and Burger King.
(Watch: Laggard McDonald's disappoints in US)
With nearly $28 billion in revenues over the last 12 reported months, and over 1.8 million employees (a few of whom demanding $15 per hour wages last week), McDonald's is the world's largest fast food chain. But, is it worth buying as an investment?
"If you want a really safe stock that pays a modest dividend, then perhaps," answers CNBC contributor Zachary Karabell, head of global strategy for Envestnet and founder of River Twice Research. Speaking on CNBC's Street Signs' Talking Numbers segment, Karabell says, "I don't think McDonald's is going anywhere anytime soon, though ten years from now, who knows? This has been true for the past few years. This was a really good stock to be in when the world was falling apart and people were looking for things that they knew were going to be around whether or not the financial system imploded."
But, notes Karabell, that is not the current world's situation and other fundamentals are now taking hold on the stock's price.
Carter Worth, Chief Technical Technician at Oppenheimer, calls the McDonald's recent returns a "McBummer of a quarter".
"The chart tells us that something's wrong," says Worth. "It's been acting poorly for months and now, of course, we learn what's wrong: fundamentally, it's not performing."
To see the rest of Karabell's fundamental analysis and Worth's technical analysis, watch the video above.
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- Consumer Discretionary