McDonald's: Set to Sizzle?

Incredible but true: McDonald's missed this year's robust stock market rally. While the Dow is up 11%, S&P 15%, and Nasdaq (NDAQ) 30%, shares of the world's largest fast-food restaurant chain are off 3%. But some savvy pros regard the lag as an opportunity. "McDonald's (MCD) is the only new name we added this year to our portfolio," says

Edwin Walczak, U.S. portfolio chief at Swiss bank Vontobel. From a 52-week high of 64 on Jan. 6, the stock has slipped to 60.34. Part of investor concern is McDonald's lower forecast for store openings, mostly in China, Japan, and Eastern Europe. At this depressed price, says Walczak, "the stock is a bargain as McDonald's continues to innovate in its core menu and business structure." He figures that with estimated earnings of $4 a share in 2009 and $4.50-$5 in 2010, it is worth 75. Using its "prodigious excess cash flow," he notes, McDonald's has been buying back its shares.