Investors' Most-Respected: McDonald's Makes #5


Apple has come out on top of Barron's annual "World's Most Respected Companies" list for the second consecutive year, while Johnson & Johnson -- which has ranked either #1 or #2 since the survey of professional money managers was launched seven years ago -- has this year plummeted to 25th place.

But for foodservice industry watchers, the most notable development in this year's rankings is McDonald's' rise from seventh to fifth place -- the first time it has cracked the Top 5 -- reflecting in no small part its remarkable performance within the context of the industry's well-known woes since the recession hit.

This year, "sound business strategy" was the factor most-cited as inspiring respect by the money managers surveyed (32%), followed by strong management (28%), ethical business practices (12% -- down from 20% last year) -- competitive edge (12%) and revenue and profit growth (7%).



Why the somewhat "belated" rise in McDonald's respect rankings? "On Wall Street, McDonald's is viewed as a company that changed its spots for the better back in 2002-03, moving away from a single-minded focus on unit growth to a more mature approach that balances growth with the return of cash to shareholders," writes Barron's. "Much as investors like McDonald's appetizing 3.3% dividend yield, they also appreciate that it has responded effectively to changes in society's eating and drinking habits."

David Hartzell, CEO of Cornell Capital Management, is quoted as giving McDonald's particular credit in light of the exceptionally volatile and risky nature of the restaurant business, and praising its ability to reinvent itself from a "burger maker" to a QSR now offering specialty coffees, salads and sundaes, among other items.

Clearly, investors feel that McDonald's overall strategy/menu reinvention cut considerably more mustard than the chain's recent run-ins with domestic consumer groups and local governments regarding marketing-to-kids issues (Happy Meals toys and Ronald McDonald both having come under fire) -- or instances like this past week's "kidnapping and execution" of a Ronald McDonald statue by a group of Finnish food activists/artists demanding answers to questions about the QSR's food ingredients, manufacturing process and recycling/waste statistics.

As for Apple, the company and founder Steve Jobs won kudos/respect for vision, courage, innovation, strong corporate culture and consistent execution. "No matter that some say Wall Street's near-religious devotion to Apple, coupled with the stock's 53% rally last year, could be setting the company and its shares up for a fall...For now, Apple reigns supreme in commanding investors' respect," notes Barron's.

J&J's tumble resulted from its recently persistent, high-profile quality-control issues, according to Barron's.

Others rounding out this year's top five are #2 (up from tenth place in 2010), #3 Berkshire Hathaway (up from fifth), and #4 IBM (same as 2010).


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