Agribusiness Investing: Will Lawsuits Scare Investors?

Several big food names made headlines on Tuesday, both involved lawsuits.  Should you let these lawsuits stop you from investing in these well-known companies?

Yum! Brands (NYSE:YUM) received good news on Tuesday.  The Alabama law firm Beasley Allen, announced it is dropping its beef lawsuit against Taco Bell.  Although the lawsuit is dropped, the beef continues.  Beasley Allen claimed that it dropped the lawsuit since Taco Bell changed its marketing and product disclosure.  However, Taco Bell CEO Greg Creed fired back that Taco Bell has made no such changes.  Either way, investors can rest easy that Taco Bell can reduce its spending on damage control.  After the initial lawsuit was filed and hit headlines, Taco Bell spent $3-$4 million on ads disputing that their taco filling actually contains 88% beef (not 35%).  YUM shares closed 1% higher.  Other quick service restaurants such as Wendy’s/Arby’s (NYSE:WEN) and McDonald’s (NYSE:MCD) closed lower for the day.

When one lawsuit ends, another one begins.  One of the world’s most recognizable companies, McDonald’s (NYSE:MCD), is being sued by a California mother of two.  The mother claims the company violates California consumer protection laws by drawing children into their restaurants by giving toys in Happy Meals.  McDonald’s is claiming no wrong has been done, because the mother has the option of buying a Happy Meal for her kids.  In other, more interesting news, Mickey D’s has received much positive media attention for its one day stimulus program.  On Tuesday, the company set a goal to hire 50,000 US employees, in just one day.  The restaurant industry represents about 10% of the US workforce, and McDonald’s already employs about 1.7 million people worldwide.  The company expects to have the hiring results sometime next week.  Shares closed down .52%, but are up 9% from last year.  The Dow member continues to expand operations and also supports a dividend over 3%.

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Disclosure: No positions.