McDonald's and Verizon

Malcolm Berko
Tue, 12 Feb 2019 21:00:00 -0800
Lifestyle

Dear Mr. Berko: My stockbroker thinks that the recent viral confrontation between a McDonald's customer and a McDonald's employee will be used as an excuse to cause large strikes at units all over the country, in which employees will demand higher wages, health insurance, retirement programs and better working conditions. He believes that this could be the catalyst that will eat away at McDonald's profit margins. He's been telling me to sell McDonald's stock for over a year. Now he wants me to sell my 300 shares of McDonald's (I bought them at $88 in 2011) and buy Verizon stock because its good dividend and its acquisition of Yahoo make it a "great growth and income stock." What do you think? — NR, Moline, Ill.

Dear NR: I discussed McDonald's in a November column, when it was trading at $180, and my positive opinion hasn't changed. Your broker is a total cretin who's begging for a commission. Keep the stock forever.
Updated: Wed Feb 13, 2019

Dear Mr. Berko: My stockbroker thinks that the recent viral confrontation between a McDonald's customer and a McDonald's employee will be used as an excuse to cause large strikes at units all over the country, in which employees will demand higher wages, health insurance, retirement programs and better working conditions. He believes that this could be the catalyst that will eat away at McDonald's profit margins. He's been telling me to sell McDonald's stock for over a year. Now he wants me to sell my 300 shares of McDonald's (I bought them at $88 in 2011) and buy Verizon stock because its good dividend and its acquisition of Yahoo make it a "great growth and income stock." What do you think? — NR, Moline, Ill.

Dear NR: I discussed McDonald's in a November column, when it was trading at $180, and my positive opinion hasn't changed. Your broker is a total cretin who's begging for a commission. Keep the stock forever.

The viral video shows a 20-year-old female McDonald's employee in Florida being lunged at and violently grabbed by a male customer. The woman proceeded to punch the man until other employees broke it up. The New Year's Eve incident highlighted a serious problem at McDonald's (MCD-$174). Not to defend the drunken scumbag who assaulted the employee, but the service at too many MCD units is so abominable that sometimes holding your anger can cause blood to flow from your eyes.

McDonald's is so ubiquitous and accessible and the food so yummish that MCD images and totems slowly become embedded in our DNA. McDonald's defines the way America eats. And when something interferes with the normally accepted process, the customer feels disrespected. Some react physically. The drunken scumbag was cheesed off not about the food but about the poor service. And MCD's management seems clueless. In many units all over the country, MCD's service ranks below that of the Postal Service, departments of motor vehicles and the Department of Health and Human Services. On occasions, I've waited for five minutes to catch a server's eye (with no one else in line) to purchase two Egg McMuffins — and then they were cold. Too often, a lunch order for six people will be missing several items. Too often, your Big Mac and fries are waiting a minute or two while the employee is either cleaning or socializing and not serving. Too often, employees look as if they live in tents, have dull, unsmiling faces and lack English proficiency. MCD's problem isn't food; rather, it's employees who're poorly trained. Many MCD employees should not take lunch breaks that are longer than 30 minutes, because many need to be retrained upon returning.

Still, MCD is a darn fine, top-tier, five-star, long-term investment that will provide investors with better-than-modest growth in revenues, earnings and dividends. I'd own that stock through thin and thick, through $90 and $50 oil prices and through a 10,000, 20,000, 30,000 and 40,000 Dow Jones Industrial Average. I remember MCD from the late 1950s, when 35 cents would buy you a Coke, fries and a cheeseburger. And in the 60-plus years since, management has gotten to know its customers, its food, its locations and its marketing. MCD's management knows that Americans are willing to accept substandard service.

Oath, Verizon's combination of AOL and Yahoo, ignominiously failed. Its new name is Verizon Media. Verizon (VZ-$55) purchased Yahoo to acquire the content of Yahoo Sports, Yahoo Finance, Tumblr, HuffPost et al. This makes AOL a third choice for digital advertising, behind Alphabet and Facebook. Former Oath CEO Tim Armstrong projected $10 billion in revenues by 2020. What a farce! He even managed to mismanage Yahoo Finance, which may be off our screens this year. Yahoo's flaky engineers, poorly managed content, slow, low-quality service, missing applications and inoperable sites are becoming common. Still, the inept and slow-witted dunderheads in management continue to nurture negative returns. Because AOL and Yahoo couldn't collaborate, Armstrong finally announced he was going fishing. To put it another way, all of Verizon's horses and all of Verizon's men couldn't put AOL and Yahoo together. So, in the last quarter of 2018, VZ wrote off its $4.3 billion purchase of AOL, and Yahoo may be close behind. And with it, many of Yahoo's platforms you've been using for years may implode.