An update on two short positions: McDonald's Corporation (NYSE: MCD), recommended on June 26, 2009 at a price of $57.00, and Fortune Brands (NYSE: FO), recommended on the same day at a price of $35.56.

McDonald's: Hold Short. MCD's shares remain under pressure. The era of the 'frugal consumer' is well underway in the United States, to McDonald's detriment. There's also a trend away from standardized fast food, and toward local, 'roadside' hamburger joints and diners: they offer unique flavors and recipes, fresher food, and often atmospheres that can't be beat.

This is the second post in Fast Food Wars, a look at the players in this unhealthy business that has traditionally garnered healthy returns in down times as Americans tank up on fries and burgers slathered with secret sauce.

Last week we looked at Burger King (NYSE: BKC), today we turn to Mickey D's, the grand-daddy of them all. McDonald's Corporation (NYSE: MCD ) boasts over 35,000 locations (franchised and company owned) in 100 countries.

With the recent focus on healthy eating by many Americans -- and now, many fast food chains offering salads and such -- world food service leader McDonald's Corporation (NYSE: MCD) is testing a new bigger burger that will cater to the consumer who likes burgers tall, wide and with plenty of calories.

The new burger will be part of the Angus family of McDonald's burgers and will come with an enhanced price for the extra weight and girth it has. So forget that quarter pounder -- the new burger will be a third-pounder as it finds its way into more McDonald's locations after being available now only in 600 locations in California. The burger is the most expensive single sandwich on the McDonald's menu at $3.99.

With competitors now offering "premium burgers" that pack in as many calories as some complete meals, a McDonald's franchise owner told corporate headquarters a few years ago that a premium burger was needed so that McDonald's could remain competitive in the market (for huge burgers, I suppose). With CKE Restaurants' (NYSE: CKR) Carl's Jr. having all kinds of premium burgers on its menu (Restaurant Style, it calls them), I guess it was about time for McDonald's to respond. But while it's new $3.99 will be its most expensive, there are still some burgers at Carl's Jr. that retail for about $6. Maybe that price difference will help McDonald's gain some market share in the battle of the big burger.

The concept of focusing on the "meat" of a business may be both a cliche and an overly carnivorous metaphor, but that doesn't make it any less true. And Wendy's is taking the cliche very literally in today's news, announcing it will sell Baja Fresh and refocus on its core hamburger business.

The renewed focus on burgers makes sense, but Wendy's International (NYSE:WEN) bought Baja Fresh only four years ago for $275 million and will be selling for barely more than 10% of that figure, $31 million, to a consortium of investment firms. That's a pretty miserable return.

Hopefully, however, the sale will allow management to spend some time getting introspective. First, there's the sagging brand. I'd agree that, as QSR Magazine's Sherri Daye Scott says, the brand image is struggling. Wendy's used to be known for its higher quality and spicier menu options compared to other fast food restaurants, and now I can barely tell the difference. When was the last time you felt the yearning for an ice-cold Frosty? In high school (I'll admit), I'd have a few a week. I haven't tasted one for years.

Then there's the menu. Why doesn't Wendy's have breakfast? We've already determined that (yes) fast food customers -- and even many of the health nuts out there -- love breakfast. The restaurant has plans to expand its test to the rest of its outlets this year. Also, Wendy's will be adding a double-melt hamburger, along with more "indulgent" sandwiches.

A lot of this sounds very derivative, picking and choosing from the successes of its competitors' strategies. I don't have a problem with that! Wendy's stock was up $1.39 today, 4.12%, to $35.11 on anticipation of good news.

[Photo diana connolly.]