Being a Big Name Isn't Enough in This Market
Doc's note: "You can't just buy big names and hope for the best."
That's the lesson editorial director at our corporate affiliate Chaikin Analytics Vic Lederman is sharing today. He explains why you can't blindly trust big name companies, even in a soaring market, and the massive shift coming to the markets...
Folks, we're in a very peculiar market...
The broad market S&P 500 Index is soaring. It's up more than 14% so far this year.
And the tech-heavy Nasdaq 100 Index is also on the move. It has climbed more than 17% in 2024 so far.
Those are impressive gains. But as Chaikin Analytics founder Marc Chaikin and I have both told our readers in recent days, that doesn't mean it's safe to put money to work in any big-name stock. It's not that simple.
McDonald's (MCD) is the perfect example...
In December, I told Chaikin PowerFeed readers that the "old burgers aren't this stock's only problem." I explained that McDonald's was struggling despite an attempt at a revamp.
You might remember that the company recently refreshed its buns. It made other changes to its menu aimed at upping the perceived quality of its products.
Unfortunately, it coupled that with massive price increases. I said in February that consumers are fed up.
And now, the company's stock has continued to struggle... despite the strong overall market.
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Today, let's dig a bit deeper. And we'll use McDonald's as an example of why you can't just buy big names and hope for the best – even in a market that has been roaring higher...
You would think that McDonald's would be a safe bet. Consumers at the bottom end of the economic ladder have been struggling.
Inflation is down from the big highs back in June 2022. But it has still remained "sticky." And you would expect that to push folks with tight budgets to the cheapest options – like Big Macs from McDonald's.
But the company miscalculated... big time. The chart is about as extreme as it gets for a blue-chip business like McDonald's...
Since I first discussed McDonald's back on December 4, the S&P 500 has climbed a staggering 19%. And over that same time frame, MCD shares are down about 9%.
This is a wipeout... the kind that could have major implications for an investor that was overallocated to this stock.
But that's the market we're in. Select stocks are soaring. And the concentration at the top is at historic levels.
According to Goldman Sachs, the market has surpassed the concentration levels we saw in the 1990s. Put simply, something strange is going on right now.
So what does this mean for investors?
There are two key takeaways...
First, it's not enough to be a big name in this market. Name recognition alone doesn't mean that a stock is going to soar. That means investors need to be wary of big names that are faltering.
McDonald's makes this obvious. The company should be soaring along with the market... but it's not.
In fact, it currently earns a "bearish" rating from the Power Gauge. And that means our system sees more pain ahead.
Beyond that, the example with McDonald's also means that investors need to be deliberate about the stocks they put money to work in. Some stocks are soaring... while others are crumbling. And that's happening amid a strong overall market.
Marc has also been paying attention to this strange situation. And last week, he went on camera to explain the details...
In fact, he sees a massive change coming for the market. And he has 80 years of hard data to back it up.
Marc believes this shift is going to continue playing out for many years to come. As he says, it's a whole new ballgame.
You won't want to miss the full story. And it's 100% free to watch. You can do so right here.
Good investing,
Vic Lederman
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