You’ll find that it’s incredibly rare to find stocks that perform well in a bear market. Generally less than 20% of the S&P 500 has positive returns during the history of U.S. recessions. This one is likely to be worse. Up until a few weeks ago there were only two Dow components with positive returns during this nasty bear: Walmart and McDonalds. But Walmart fell apart in early January when they reported substantially lower sales than expected. The stock fell swiftly to its 52 week low. McDonald’s, however, has held up nicely. With the stock sitting just 10% below its 52 week high and its first and second quarterly sales likely to nosedive the risk/reward in a short position is looking intriguing.
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Can we really experience the worst bear market in 80 years without McDonald’s stock taking a hit? Everyone thought Walmart wasn’t vulnerable because the low end consumer was “trading down”, but that was proven wrong when they reported their fourth quarter sales. I have a feeling McDonald’s is starting to feel the pinch as well…
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.