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Mickey D’s Gets an ‘A’ for Turnaround

A couple of weeks ago, we looked at Buffalo Wild Wings (Nasdaq: BWLD) and cautioned that there was no rush to jump into the stock.

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A couple of weeks ago, we looked at Buffalo Wild Wings (Nasdaq: BWLD) and cautioned that there was no rush to jump into the stock. The share price has since dipped another 6 percent, closing trading on Friday at about $120 a share. Clearly, investors need to see more to buy a turnaround story there.

This week we take a look at a restaurant chain that did manage to engineer an impressive turnaround. As you can see in the chart below, McDonald’s (NYSE: MCD) essentially treaded water until taking off in mid-July 2015.

When taking into account the fact that the S&P 500—proxy for the broader market—returned some 34 percent in 2013 and another 15 percent in 2014, MCD’s relative performance during that period was pretty lousy. Year to date, however, MCD has returned (including dividends) almost 30 percent in 2017. In a relatively short amount of time, the stock has gone from a laggard to a leader.

Flash back to 2013, McDonald’s was in the midst of a slump. From the second quarter of 2012 through the first quarter of 2015, a span of twelve quarters, the company missed revenue and earnings estimates each nine times. It did not missed expectations by very much—the largest revenue or EPS miss during that period was less than 7.5 percent—but the consistently underwhelming financial results sapped investor enthusiasm. Between 2012 and 2014, earnings per share fell from $5.37 to 4.82 and the restaurant chain was losing market share to competing fast-food chains. And relationship between the corporate office and franchisees was very poor.

Fast forward to 2015. In March that year, Steve Easterbrook, former chief brand officer and former head in the U.K. and northern Europe divisions, took on the mantle of CEO and launched sweeping changes across the organization culturally and strategically.

He stripped away layers of bureaucracy to simplify the corporate structure and to increase accountability. He mandated that the company listen more to its customers to get in tune with changing customer tastes and to endeavor to offer higher-quality service and better food. For example, one of the earliest actions under Easterbrook was to commit to only serving chickens raised without the use of antibiotics to better meet customer demand for antibiotic-free food.

One major turnaround driver was the implementation of “All Day Breakfast,” which made its popular Breakfast Menu available to customers during all open hours and immediately boosted sales, which by the second half of 2015 had already breathed new life into the stock. The introduction of the McDonald’s app enabled customers to order remotely and pick up their food at a location of their choice.

Moreover, the company has tested and rolled out self-order kiosks and table service that aimed to improve efficiency and customer service. Expansion of its menu also gave customers more choices and more reason to return. For example, the introduction of the “Grand Mac” and the “Mac Jr.,” different size versions of its famous “Big Mac” burger, have been successes. The restaurant chain has revamped the décor at many locations to improve the look and feel of the McDonald’s experience and even introduced delivery services in select areas.

Put everything together and same-store sales are growing again, including at a 4 percent clip globally in the latest-reported quarter. Top and bottom lines in recent quarters are consistently beating The Street’s expectations and the stock performance has made shareholders very happy.

Some franchisees voiced their displeasure and skepticism at Easterbrook’s reform plan in the beginning, but improving sales quickly won them over. By the end of 2018, McDonald’s projects that by the end of this year, about 93 percent of its locations will be operated by franchisees, up from approximately 80 percent when Easterbrook took the helm. Franchisee-operated restaurants offer the corporate parent higher profit margins and local operators tend to have better knowledge of local tastes.

So for Buffalo Wild Wings, as McDonald’s shows, a turnaround is always possible. But there’s still a lot of work to be done. Mick McGuire’s plan to refranchise more locations is only one piece of the puzzle. In the months ahead, the company will have to make some major moves to get investors excited again.

Photo: “McDonald’s” by JeepersMedia is licensed under CC BY

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Missed The Internet Boom? Here’s Your Second Chance

Right now, there’s a massive bull market taking shape that’s similar to the raging dot-com boom of the turn of the century. 

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Second chances are rare in the financial world. Once the whole market knows about a price run, it’s often too late to participate. However, there are a few exceptions to the rule. Right now, there’s a massive bull market taking shape that’s similar to the raging dot-com boom of the turn of the century.

While there are significant differences between the two booms, the differences make the new bull market less risky and longer lasting than the original.

If you missed the internet boom of 1997 to 2001, you are not alone. Believe it or not, many investors failed to participate in the exploding stock market during those heady times.

The good news is it’s not too late to participate in the next booming tech market!

Lessons Of The Dot-Com Bubble
I can’t say I blame the majority of those who missed the monster profits of the first internet boom. The Nasdaq soared from 1,000 to 5,100-plus, and stocks like Qualcomm (Nasdaq: QCOM) rocketed nearly 3,000% in value. At the end of the frenzy, the Nasdaq hit an outrageous price-to-earnings ratio of 200.Rightfully fearful of the extreme valuations and warnings from luminaries like Warren Buffett, the majority of profits were captured by a select few. Most others either lost money or avoided stocks in the internet sector altogether.

Investors who didn’t take profits in time were crushed when the Nasdaq crashed nearly 80% from 2000 to mid-2002. Companies that made no fundamental or market sense disappeared from the exchanges, and many investors lost their nest eggs.

At the same time, some new stock market millionaires were minted. These were the investors who judiciously put their money to work and became wealthy when others lost it all.

I have discovered that controlling greed, diversifying, and using stop-loss orders are the keys to capturing profits while avoiding the inevitable crash of every boom-type scenario.

Sure, some people will get lucky by plowing all their capital into a single stock during boom times. However, most who take this tack will suffer the consequences. History has proven that this is hardly a reliable strategy.

The Bull Market Rising In The East
Right now, emerging markets, namely Asian economies, are in the midst of a massive internet boom. However, there are enormous differences between the U.S. internet bull market and the Asian one.

For one, most of the Asian internet companies participating in the thriving sector are earning substantial profits, rather than simply relying on oversized valuations. Even better, fundamental economic drivers like an aggressively expanding middle class, climbing disposable incomes, and the move from rural into urban areas act as long-term bullish fuel for the internet sector.

Remember, the majority of emerging-market consumers have never shopped at a big box retail store or owned an automobile. This opens up significant long-term growth potential for internet-based commerce. While the traditional retail infrastructure is lacking, internet use is exploding in the emerging markets. This sea-change enables consumers to access goods and services otherwise inaccessible and creates a tremendous opportunity for savvy investors.

Thanks to these fundamental economic drivers, Asian internet firms like Tencent Holdings (OTC: TCEHY) andAlibaba (NYSE: BABAhave seen their stock prices soar 100% over the last year. JD.com (Nasdaq: JD) and Baidu (Nasdaq: BIDUare trading higher by around 50% over the same period. I fully expect this bull market to continue over the long term.

Don’t worry — you don’t have to design a diversified portfolio of Asian and other emerging-market internet stocks on your own. In fact, there’s an exchange-traded fund (ETF) that’s perfectly designed for this purpose.

The Emerging Markets Internet & Ecommerce ETF (NYSE: EMQQ) is trading higher by nearly 64% so far this year by following the EMQQ index.

The index is built on over 40 companies doing business in emerging markets — and even carries exposure to a few frontier markets. We’re talking about, for example, the internet and e-commerce sector in China, India, Brazil, Russia, and a full variety of emerging and frontier markets. It is a modified market-cap index, with the most extensive position capped at 10% to mitigate single-company risk.

The ETF’s largest holding is Tencent, with a 9.88% allocation, followed by Alibaba with a 9.62% stake and Naspers at 7.21%. The top 10 holdings make up around 50% of the total allocations with the rest diversified across a wide variety of emerging market internet names.

Risks To Consider: Tremendous political risks exist in emerging markets. Diversification across a variety of companies does not mitigate the risk of hostile political regimes that may come to power. Always use extra diligence when investing in emerging and frontier markets.

Action To Take: It is clear that the fundamental economic drivers are just starting to fire on all cylinders and this boom should continue for many years.
Buy now in the $39.50 per share zone as the stock finds support at the 50-day simple moving average. I suggest using a stop-loss at $34.23 per share, and my target price is $55-plus per share.

Editor’s Note: Unfortunately, investors who blindly follow Wall Street will miss out on their share of the $1.3 trillionworld-changing opportunity Elon Musk is pioneering. Because while the Street is so busy harping on Tesla failures, they’re missing how Musk’s other master plan can line investors’ pockets with huge profits. If you trust Wall Street, this is NOT for you… but if you believe there’s more money out there than they’re willing to let you in on, then grab the full details on how you can take your share of this earth-shattering opportunity.

David Goodboy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

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5 Retail Stocks to Buy Ahead of Black Friday

It’s that time of year again. The winter chill sets in. The nights get darker. And the smell of turkey dinners, cinnamon and pumpkins fill the air.

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It’s that time of year again. The winter chill sets in. The nights get darker. And the smell of turkey dinners, cinnamon and pumpkins fill the air.

And, of course: The Black Friday kickoff of the holiday shopping season. Which actually starts on Thursday evenings in more and more locales.

The retail sector is ready. Since peaking in early 2015, the Retail SPDR ETF (NYSEARCA:XRT) has lost roughly 20% amid reports of empty malls, competition from Amazon.com, Inc. (NASDAQ:AMZN) and tepid shopping traffic.

Soul searching, and corporate strategy shakeups, have followed. Now, many familiar names in the industry are down to their fighting weight and ready for a solid holiday season.

Here are five to watch:

Retail Stocks to Buy for Black Friday: Gap (GPS)

Gap Inc (NYSE:GPS) shares are surging higher after the company reported better-than-expected comp-store sales for the prior quarter, ending a long string of negative results.

Overall sales increased 1.1% to $3.84 billion. Barclays analysts raised their price target in response, highlighting underlying momentum in GPS stock.

Gap will next report results on Feb. 15. On Nov. 16, earnings of 58 cents per share beat estimates by four cents on a 1.1% rise in revenues. Forward guidance was solid as well.



Retail Stocks to Buy for Black Friday: Foot Locker

Foot Locker, Inc. (NYSE:FL) shares are surging nearly 30% on Friday, closing the gap from the post-earnings wipeout in August, after reporting better-than-expected earnings of 87 cents per share, seven cents ahead of estimates.

This despite a 0.8% decline in revenues. Forward guidance was strong as well, with smaller comp-store sales decline anticipated.

What really got investors excited was the announcement of an “elevated partnership model” with Nike, with a pop-up store in New York focused on Nike products and the hiring of Nike-focused employees to elevate the shopping experience across the brand’s stores.

The move is unlocking short-covering buying, with 10.5% of the float sold short.



Retail Stocks to Buy for Black Friday: Abercrombie

Abercrombie & Fitch Co. (NYSE:ANF) is surging nearly 30% on Friday after reporting better-than-expected earnings of 30 cents per share vs. the 21 cents expected.

Revenues grew 4.6% from last year. This is a decisive change in the positive direction from the previous two quarters, with losses of 16 cents and 72 cents per share reported.

Short-covering is in play here as well, with nearly 23% of the share float sold short. Top-line growth is turning around for the company, which is trying to reimagine itself after its old preppy-chic image grew tired: Comp-store sales increased 4% vs. the 0.5% analysts were expecting.



Retail Stocks to Buy for Black Friday: Best Buy

Best Buy Co Inc (NYSE:BBY) shares look ready for an upside breakout from a multi-month consolidation range going back to May after reporting solid quarterly results on Thursday.

Earnings of 78 cents per share matched estimates on a 4.2% rise in revenues. Impressive considering the drag on mobile sales from a delayed iPhone X launch.

The company will next report results on Feb. 15 before the bell. Momentum is increasing, with same-store sales up 4.4% last quarter after increasing 1.8% in the year-ago period.

With aggressive Black Friday sales on 4K TVs and other goods, the company is well positioned to have a solid holiday season.



Retail Stocks to Buy for Black Friday: Walmart

Wal-Mart Stores Inc (NYSE:WMT) shares jumped 10% this week after reporting better-than-expected quarterly results.

Up more than 40% from its March lows, the company has enjoyed increased investor interest thanks to its renewed focus on lower prices and aggressive e-commerce push with Jet.com and an upcoming high-end store brand offering; taking the fight to Amazon in a big way.

Earnings of $1.00 per share beat estimates by three cents on a 4.2% rise in revenues. Forward guidance for the holiday quarter was strong. The company will next report results on Feb. 15 before the bell.

Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.



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How to Protect Your Stock Portfolio in the Next Bear Market

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Originally Published at InvestingDaily 

The stock market is hitting new all-time highs on almost a daily basis. Good news for now, but the faster something goes up, the faster it can come crashing back down if the bullish music stops. What’s worrisome is that stocks have not even paused long enough to experience a run-of-the-mill 3% correction for than 255 trading days, which is the longest stretch of stock tranquility in history (i.e., at least since 1928). Stock valuations are also stretched, with some measures showing the current stock market as the second-most expensive in history.

Let this bake in: the stock market is more expensive now than in 1929 and more expensive than in 2007 – both time periods right before soul-crushing bear markets!

We’ve all made good money during this relentless 8 1/2 year bull market since the 2009 market lows, but much of these gains could be taken away if a bear market takes hold. Hedging your stock portfolio to protect against a bear market has never been more important!

U.S. Treasury Bonds Cannot Be Relied Upon in the Future as a Hedge

Investors have often used long-term U.S. Treasury bonds as a downside hedge because historically there has been a negative correlation between bond returns and stock returns. When the economy is faltering, bond prices historically go up and interest rates fall, whereas stock prices go down because corporate earnings will decline. The rise in bond prices will help compensate an investor for the drop in stock prices.

Sounds simple, right? Not so fast . . .

Math geniuses at PIMCO (bond king Bill Gross’ old company) have issued a warning that U.S. Treasuries can no longer be relied upon to protect a crashing stock portfolio. The reason is that the global economy has never fully recovered from the 2008-09 financial crisis caused by sub-prime mortgage defaults.

Long-term interest rates are so ultra-low right now after years of the Federal Reserve’s zero interest-rate policy and billions in quantitative easing – not to mention the negative long-term interest rates which exist in Europe and Japan – that there simply is not any more room for bond prices to rise or for interest rates to fall.

Furthermore, with commodities such as oil looking set to rise in price again after several years of a supply glut, inflation could come roaring back which would cause bond prices to fall even if stocks are crashing.

You simply cannot expect bonds to bail out your stock portfolio. The PIMCO quants describe the situation this way:

“The key to mitigating equity risk in portfolios is investing in assets that are negatively correlated with equity markets yet exhibit the potential for a positive expected return. For most of the past 20-plus years, bonds have fulfilled this role in portfolios, aided by a substantial tailwind of stable or falling inflation. On a forward-looking basis, bonds will continue to be a key part of portfolios, but the potential for both positive expected return and negative correlation with equities may be tested at times. Beyond fixed income, the search for positive-expected-return, risk-mitigating assets becomes more challenging.”

Stock Options are the Solution to Hedging Your Stock Portfolio

One of the asset classes that PIMCO suggests investors could use as a hedge to replace bonds is options, either buying puts or selling calls. Unlike bonds, which can get overvalued and useless as a hedge, options never go out of style and always work if used correctly. The reason is that options are derivatives of an underlying asset, and if that underlying asset declines in price, options on that asset can profit BIG TIME.

You see, options are leveraged tools that don’t cost much money but can offer turbocharged rates of return based on small price changes in the underlying asset. For example, the PIMCO quants say that a decline of 5% in a stock can translate into an option return of 33.2% or more. Perhaps most importantly, the positive gains from options can occur in reaction to negative price changes in stocks, making options the perfect downside hedge.

In both of my option trading services, Options for Income and Velocity Trader, I often recommend option positions that benefit from a stock price decline. In Options for Income, my preferred bearish strategy is a call credit spread and in Velocity Trader, I focus more on bearish put debit spreads. Both types of option strategies do a great job of hedging.

To learn more about these hedging option strategies, take a risk-free trial today to either Options for Income or Velocity Trader.


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New Device Spreading 5X Faster than the iPhone

The iPhone is the fastest-spreading technology in history. Faster than the PC, TV, or radio. Which makes what I’m about to share with you all the more astonishing…

A new device has emerged that is now spreading 5X faster than the iPhone!

Almost overnight, you’ll see this device everywhere. Homes, schools, businesses, hospitals… there’s no place this device is not entering. Or rapidly changing.

This device is so game-changing, and its future so lucrative, that everyone from Mark Zuckerberg to Bill Gates, along with every Silicon Valley giant, big bank, and media conglomerate is investing money in it.

And one cutting-edge company that makes the must-have components powering this device is about to deliver investors the windfall of their lives. Because right now, it’s positioned to reap a massive share of the $150 billion this device will generate.

If you want to lock in shares for a reasonable price, you need to make your move now. Click here to get the details you need to know.

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