Sean Chaitman, President and Chief Investment Officer of Shelter Rock Management.
McDonald’s (NYSE:MCD) is a dividend growth stock that lets investors sleep at night according to Sean Chaitman, President and Chief Investment Officer of Shelter Rock Management.
He has three decades of investment management experience as a portfolio manager and a research analyst.
Prior to Shelter Rock, he was at Heirloom Capital Management, a long and short investment fund that had assets in excess of $500 million.
He was also a member of the long and short investment fund Zinc Capital Management where he focused on technology investments.
Mr. Chaitman was formerly a senior equity research analyst at Jesup & Lamont Securities Corporation and a member of Smith Barney’s value stock research team.
Mr. Chaitman received a B.S. degree in economics from the University of Wisconsin and an MBA from Columbia Business School.
He was ranked by Reuters as a top 10 small- and mid-cap electronics analyst in its 1999 and 2000 surveys.
He has been quoted and featured in The Wall Street Journal, Investor’s Business Daily, Forbes and The Wall Street Transcript. Mr. Chaitman is married to Lori, global head of investor relations at Kyndryl Holdings, and they have two sons, Max and Jack.
In his 2,245 word interview, exclusively in the Wall Street Transcript, Mr. Chaitman places McDonald’s (NYSE:MCD) as a core holding.
“Another stock that we like is the ultimate sleep-at-night dividend growth stock, and that’s McDonald’s (NYSE:MCD).
It’s been a solid long-term core holding in all of our strategies. McDonald’s (NYSE:MCD) has raised their dividend every year for the last half century. We think the stock can continue to deliver high single-digit to low double-digit returns in the next five years.
The company’s been very successful with their digital ordering, menu creativity and productivity enhancements. We know McDonald’s (NYSE:MCD) will greatly benefit from artificial intelligence which we expect to continue to drive cash flow.
The nice thing about McDonald’s (NYSE:MCD) stock is when the economy is strong, people eat at McDonald’s (NYSE:MCD).
When we’re in a tough economy, like we’re in now, people go there even more.
The stock also tends to shine in difficult markets. Last year it was a standout for having positive returns.
The same thing even happened in 2008, which was the worst market in most of our lifetimes — actually all of our lifetimes. It’s a good hedge for our portfolios when we go through difficult markets…
Wendy’s (NASDAQ:WEN) and Google (NASDAQ:GOOG) already announced an artificial intelligence chat-box drive-through partnership so we know McDonald’s (NYSE:MCD) is also working on this.
I would expect when we go through drive-throughs, instead of a person saying, “What can I get for you” — you’re probably going to have a computer, an automated program, asking that.
This will lead to a lot of employee savings and efficiencies…
One thing we know is, at McDonald’s (NYSE:MCD), they tend to get ahead of the trends.”
Two other stock picks rival McDonald’s (NYSE:MCD) in the Chaitman portfolio:
“There’s a couple of stocks that we’re invested in that are benefitting from the resurgence in travel now that the pandemic has subsided. O’Reilly Auto Parts (NASDAQ:ORLY) is a large supplier of car parts and Transdigm (NYSE:TDG) is the leading supplier of airplane parts.
They’ve both been great stocks to own and we think that will continue to be the case over the long term.
Both companies are growing double digits and generate very strong cash flow.
In the case of O’Reilly, more people are taking road trips and new cars have become less affordable.
This is causing more wear and tear on cars. O’Reilly’s taken advantage of this by opening new stores.
They have a large distribution network of readily available parts and a well-trained workforce of service professionals.
This helps generate a lot of repeat business.
They also use a lot of their excess cash flow to fund a large share buyback program.
The company has actually bought back close to 50% of their shares over the last decade.
This is a nice tailwind for their earnings per share growth and it helps support the stock in difficult markets.
For Transdigm, as I mentioned, it’s the leading plane parts supplier and they have the added benefit of being a single-source supplier for a lot of high-margin proprietary parts used on most commercial and military aircraft.
Over time, the company grows with the aerospace industry, but at a much quicker pace, since they use a lot of their excess cash to buy other aerospace companies.
They also pay out large special dividends every couple of years using their excess cash flow.”
Dividends from McDonald’s (NYSE:MCD), O’Reilly Auto Parts (NASDAQ:ORLY) and Transdigm (NYSE:TDG) are not the portfolio building stock recommendations in this exclusive Wall Street Transcript interview.
“We always go through these periods.
And I would go back to a famous quote that Warren Buffett once said: “Only when the tide goes out do you learn who has been swimming naked.”
Every year we get these hot technologies and new investment themes that people get excited about.
There’s a halo effect on a lot of stocks that get caught up in it and don’t deserve it.
People buy up a group of stocks — no matter what their fundamentals — out of a fear of missing out.
You see a bubble form and then the bubble pops.
I think that as you invest over time, you want to be aware of that.
If you remember a few years ago, everybody was looking for the next Tesla.
An electric vehicle company, Rivian (NASDAQ:RIVN), actually went public with no sales and it had a value more than Ford, GM and some other big car companies combined on the promise of making electric trucks for Amazon.
Not surprisingly, Rivian’s stock has dropped about 90% from the IPO. We saw the same with crypto.
I think the lesson to learn is: Know what you own, know why you’re investing in it, and don’t overpay for smoke and mirrors.
This is why we follow processes when we invest — to help keep our emotions in check.”
Read the entire 2,245 word interview, exclusively in the Wall Street Transcript.
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