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Thursday, September 14, 2006

What Is Hedge Fund Money Doing In McDonald's? (MCD)

A large hedge fund, Pershing Square Capital, has received a waiver to buy almost 800 million shares in McDonald's, about 2% of the outstanding, according to the Associated Press..


Pershing has a history of putting management on the spot. The company made a run at McDonald's last year and tried to get the fast food company to spin-off some of its stores.

But, this time Pershing may be barking up the wrong tree.

McDonald's may have been vulnerable when Pershing bought 4.9% of the company's shares last year. But, the stock had tumbled to $27. McDonald's now trades at almost $38, a six year high. Pershing sold its shares in the second quarter, according to filings, and missed some of the run.

According to Reuters, McDonald's had same store sales increase by 6% in August, well ahead of forecasts, and an extraordinary number for such a large company.

Pershing may be buying in too late.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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