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Fear And Uncertainty Create Opportunity

October 21, 2012 | About:
Earnings season is upon us and in case you haven't noticed there have been some serious pullbacks in certain dividend growth stocks. Companies have been busy publicizing their Q3 earnings and revenue numbers and it seems that the weakened economy have hurt some. It's times like these that you have to ask yourself if you're really in the market for the long-term or not.

For instance, McDonald's (MCD) recently posted its worst quarterly sales growth in nine years and shares sold off by 4.46% on Friday. McDonald's global sales at new restaurants fell below 2% for the first time in almost 10 years. So, is this the time to sell MCD or is this an opportunity to purchase shares? Are you a trader or an investor?

I look at uncertainty as opportunity. MCD had a lousy third quarter. So what? The question really becomes whether or not you believe this company will be selling more of its products to more people around the world 10 years from now as the global population grows and as MCD enters new markets. That's really the question one should be asking oneself.

Whenever I decide to invest some of my hard earned capital with a company I plan on holding on to those shares forever. As long as the company continues to behave in a way that rewards loyal long-term shareholders and raise its dividends at a comfortable pace (usually a pace that exceeds inflation) then why would I sell shares? Are people still going to need eat next year and the following year and every year thereafter? Of course. Are a large number of these people going to choose McDonald's? You betcha.

McDonald's will continue to sell its products to consumers here at home and abroad as it always has, and it will continue to share that success with shareholders. It will continue to innovate with new products, even as competitors copy them, and McDonald's will continue to spread its brand name food to all corners of the world.

McDonald's and its almost 5% drop on Friday is but just one example where uncertainty and fear creates opportunity for the long-term investor. As short sighted traders and market participants that trade on trends move out of solid blue chips that fail to meet some obscure analyst's predictions for three-month performance, this is the time for long-term investors to buy up these shares and lock in attractive long-term prices with great entry yields. For instance, MCD now yields a full 3.47%! Or, you could lock up your money for a decade with a 10-year treasury that yields less than half with fully no chance of capital appreciation. The choice is yours.

How about you? Do you see uncertainty and fear as opportunity?

Full Disclosure: Long MCD

About the author:

Dividend Mantra
Trying to retire by 40 by investing in dividend growth stocks and living frugally, valuing time over money.

Visit Dividend Mantra's Website


Rating: 2.9/5 (21 votes)

Comments

tkervin
Tkervin - 1 year ago
I suppose I define a "Serious Pullback" quite differently.

When I was accumulating MCD in the mid 1990's.......that was a great opportunity point.

My return from then until my selling during McDonalds' last run up was very acceptable.

2008-2009 was another good entry point.

Call me when we reach sub-70....

mocheng
Mocheng premium member - 1 year ago
you could be waiting forever for sub-70.

2008-2009 is a really rare period, I am not saying it would never happened again, but it will probably take a couple more decades.
tkervin
Tkervin - 1 year ago
Perhaps Mocheng. Perhaps.

Or if the broad market has a 25% pullback from these levels, which is not all that rare and MCD falls less......say 20%.........well there we are.

I would not be surprised at all to be able to buy McDonalds near the $70 point in the next year.

If not, no harm done. If so, I get a really good position.

Like Buffett says.......it's a game where you don't have to swing!

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