The stock market often climbs the “wall of worry.” Any negative event, no matter how small, seems like a potential threat to a stock that’s been rallying. Over time, most negative events look like little more than a speed bump on a long-term stock chart.
Even the Crash of 1987, when stocks slid 19% in a day doesn’t look so bad on a multi-decade chart. For traders, smaller selloffs from short-term news events can be a top time to buy.
One possible buy now? McDonald’s (MCD). Shares slid on news of an E. coli outbreak in Colorado.
We know from experience that when a restaurant chain has this kind of news event, it will provide a big earnings hit in the short-term. However, as the issue is resolved, consumer confidence will return. That’s what happened with
Chipotle (CMG) a few years back on a similar outbreak.
McDonald’s shares fell 10% after-hours on the initial news. The stock was barely down just 5% the following day.
Action to take: Long-term investors may want to build an initial stake in McDonald’s now, and use any fear over the coming months to add to that position.
At current prices, McDonald’s pays a 2.3% dividend, which it has a long-term history of raising over time.
For traders, a long-term rebound is likely, but it may take some time to play out. The March 2025 $330 calls, last trading for about $4.85, could see high double-digit returns on a trend higher in the months ahead.
Disclosure: The author of this article has a position in the company mentioned here, but may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.