McDonald's Corp. (MCD) is proving of late to be a nice place to invest a buck in a market roiled by volatility.
The restaurant giant's shares were up again in early trading Tuesday as they looked to build on a gain of 10% since the start of October. While many high-flying stocks have fallen to earth, McDonald's has been gaining ground.
Action Alerts PLUS portfolio manager and TheStreet's founder Jim Cramer has called the stock "one of the quintessential winners since [Fed Chair Jerome] Powell made his intemperate remarks."
The turnaround in the stock certainly supports that view.
As investors turn away from aggressive investing and back to classic standbys, McDonald's could end up being a market leader as its historical resilience in tough markets and forward-looking remodeling plans garner attention, analysts say.
"MCD is the only 'defensive' restaurant stock in our coverage, as demonstrated in both stock and fundamental performance, at a time when defensiveness should matter more," Morgan Stanley analyst John Glass wrote in a note explaining his bullishness on the stock. "MCD provides a stabilizing, defensive counterbalance in a volatile market environment."
Glass noted that the McDonald's stock historically has displayed out-performance in difficult environments, as it did from 2008 to 2009, making it ideal for investors wary of rougher sailing ahead.
Glass and his team recently upgraded the stock from "Equal Weight" to "Overweight" and raised his price target from $173 to $210 based on his bullish, but defensive, take.
The analysis was backed by Stephanie Link, Nuveen's global head of equities research, who highlighted McDonald's as a consumer staples stock, bolstering its defensive appeal.
"You have a restructuring story. You have a capex reduction story in the next couple of years [and] you have a margin expansion story as they refranchise," Link explained on CNBC. "You have better growth [than peers] and a restructuring story to boot."
The consumer staples sector, along with traditional defensive sectors such as healthcare and utilities, has been heavily touted by equity strategists amid the volatility given the steady demand for their products and lower price-to-earnings ratios available.
McDonald's also serves as a "bond proxy" of sorts in light of its 2.5% dividend yield and its insulation from trade turmoil relative to its industry peers.
To be sure, McDonald's price-to-earnings (P/E) ratio, at 24.5, is high relative to the company's peers, denting the thesis of defensiveness to a degree.
Still, considering the growth, capex and modernization themes underwriting the stock, analysts are confident McDonald's remains a tasty pick.