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Tuesday, October 24, 2006

Someone Doesn’t Like McDonald's (MCD)

McDonald’s seems like a very nice company, notwithstanding the fact that it sells a lot of food that can give you coronary artery disease. The company’s quarterly earnings were excellent. Revenue went up 10% to $5.88 billion, and net rose at an even better rate to $843 million.

After all the good news, McDonald’s stock moved to a 52-week high of over $42. The stock has been as low as $31.48 in the last year.

So, why does McDonald’s have the largest increase in short position of any stock traded on the NYSE? Not only was the increase large, it was spectacular. Shares short in McDonald’s went from 13.1 million to 60.5 million in the month ending in mid-October.

For a short position in a large company to rise 20% or 30% is not odd. But, for its to increase by a factor of four times is almost unheard of.

McDonald’s stock has not been this high in over six years. And, if it adds a few dollars, it could hit an all-time high. That, by itself, may be a reason to believe that the stock could come down some. Just a little bad news can take shares back a few rungs once they have had such a substantial run.

But, if McDonald’s continues to do well, whoever bet against them could lose a lot of money.

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

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