04Aug12:58 pmEST

An Arbitrage Play of Sorts

Along with Disney, McDonald's is quietly turning in a lackluster performance in the market. 

Just as with DIS, MCD may be suffering the effects of a long in the tooth multi-year bull run, as the seemingly can't-miss blue chip name has noticeably lagged other fast food players like JACK QSR YUM since Memorial Day. 

But one name have played previously with Members is related to MCD, and indeed looks much better here on the long side. That name would be ARCO, or Arcos Dorados Holdings Inc. a McDonald's franchisee, specifically 2,121 McDonald's-branded restaurants in Brazil; the Caribbean division, consisting of Aruba, Curacao, Colombia, French Guyana, Guadeloupe, Martinique, Puerto Rico, Trinidad and Tobago, the United States Virgin Islands of Saint Croix and Saint Thomas and Venezuela; the North Latin America division (NOLAD), consisting of Costa Rica, Mexico and Panama, and the South Latin America division (SLAD), consisting of Argentina, Chile, Ecuador, Peru and Uruguay (courtesy of Google Finance). 

That may be a mouthful, but it drives home the point that some type of arbitrage play may be underway, given ARCO's wildly impressive performance compared to MCD's since the spring. 

On both respective daily charts, below, we can see as much. 

Into the rest of the summer and the autumn months, I am looking for this theme to continue, since MCD has enjoyed a steep multi-year bull run while ARCO is only now trying to turn the corner after an endless downtrend since 2011. 

The long ARCO/short MCD thesis may not be classic arbitrage, but it certainly incorporates some of the elements given the overlap. 

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