Would you rather: MCD or SBUX?

A game of “Would you Rather” is about as iconic to juvenile parties as spin the bottle. While the usual questions involve picking to sever some limb or eat an grotesque item, what about a “Would you Rather” that pays homage to two institutions as iconic in American culture as the game itself? An interesting article was published this morning by Pew Research Center that included a curious survey question: “Would you rather live in a place with more McDonald’s or more Starbucks?”

The answer may seem obvious to some. McDonald’s won by 43% to 35% in a telephone survey among a nationally representative sample. Digging deeper into the numbers, Americans manage to validate just about every stereotype one could think of for different demographics. It’s not surprising that Starbucks lost by only one point to McDonald’s in the group of women. Liberals also really like their coffee-13% more than they do Big Macs. It is also interesting to note that education and income went hand in hand when choosing between the two.

So another question would be “Would you rather own MCD or SBUX?”

McDonald’s (MCD) is one of the few companies right now reporting positive numbers of any kind. In this economic meltdown, McDonald’s has been able to distinguish itself as a cheap dining alternative and the numbers show they are doing it successfully: Sales were up in Asia 10%, in Europe 7% and even 5% in the U.S. What do investors think about MCD? 85% of predictors at PredictWallStreet predicted MCD would close up. Looking at the one month sentiment graph, sentiment seems to be sinking to become somewhat bearish. The price is also falling. The market in general has had a really bad day, worse than usual, so it’s expected it would bring most stocks down. Just looking at the date on PredictWallStreet though I can see that investors seem to be optimistic about MCD regardless of what the price/market is doing.

Starbucks (SBUX) just introduced their instant coffee brand Via to mixed reviews. As I said in my last post I think it’s a great idea, but its actual impact could be small as the instant coffee market is likely small. There has been a lot of speculation about spending at Starbucks declining, but comparing January 08 spending to January 09, average monthly spending was up 24% according to Geezeo users. Investors don’t seem to be feeling good about Starbucks though. At PredictWallStreet, 83% of predictors predicted SBUX would close down-almost the exact opposite of MCD. Sentiment is heading to become extremely bearish as well. It appears that investors have a lot less faith in Starbucks and are feeling pretty pessimistic.

I guess I’m not really going to make any sort of formal conclusion on which is better because I realize there are so many other aspects to take into account than just looking at sentiment. I think it depends what kind of scope you have here. MCD is expensive compared to SBUX, and I’m not sure how much of a rebound is really left in there stock. But they have a strong company that has proved it can weather an economic storm. SBUX is pretty cheap, and I would think normally there would be lots of room here for the price to move up but Starbucks is a luxury item. And $4 “luxury” lattes are the first to get cut in a recession. It’s hard to say how long people will stop buying lattes for because it’s hard to say the economy has even hit a bottom. If I was in it for a very, very long run, I guess my pick would be SBUX because of it’s price now, its future potential, and because when things do get better, that mochachocha latte will be their waiting for its coffee lover to come back. You can say the same about McDonald’s, but they are also close to the top of their ladder. I wonder how much further up there is to climb. When ( I know this is a long when) the economy gets better and people have more cash in their pocket, how many of those people will continue to eat at McDonald’s?

Disclaimer: I hold no interest in either McDonald’s Corp. or Starbucks Corporation. I am not a financial adviser. Talk to a professional before making any investment decisions. Nothing in this blog should be considered advice or a recommendation.

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