Just some more of the usual confirmation bias I like to wallow in.
Now about McDonald’s (MCD) and Pfizer (PFE).
McDonald’s: The golden arches have been under siege recently as sales, particularly in the U.S., continue to fall. With 65% of revenue coming from Europe and Asia, the strength of the U.S. dollar has also dinged results. While McConville says there is clearly a secular decline in fast food with consumers pushing for more healthful options, McDonalds is slowly but surely changing its offerings. McConville also likes the possibility of the company spinning off its franchise locations into a “McREIT,” though he stresses the company has denied the possibility. The company generates about $5 billion in net rents from franchisees annually. And while management has played down the possibility of a REIT, McConville says, “it’s nice to have that real estate ownership in your back pocket.” Including its real estate assets, McConville estimates the company’s fair value at $115-$120. McDonald’s currently trades around $97.
Pfizer: The breakup of Pfizer (PFE) has long been a popular point of discussion for analysts and investors. Based on a sum-of-the-parts analysis of the pharmaceutical giant’s two main businesses — innovative treatments and established drugs — McConville puts the company’s value at around $40 a share compared to a recent price of $34. [Barron’s has also made the case that Pfizer stock can climb.] McConville also thinks the company’s portfolio is promising, particularly its recently approved breast cancer treatment, a potential blockbuster that could register annual sales anywhere from $4 billion to $11 billion. “It’s a reasonably priced large-cap pharma with the catalyst of the breakup over time or a potential M&A deal that really effects the earnings growth of the company.”