Tuesday, November 6, 2007

Starbucks... Ready for a Triple?

The Motley Fool is talking about Starbucks (SBUX) today.


In his article, Rex Moore list Starbucks as one of several companies that are poised for a possible triple from here.

His reasons: SBUX has high net margins and high return on assets when compared to its peers in the restaurant industry.

Starbucks: A Green Investment Poised for a Comeback

Starbucks is, of course, part of our Evergreen Portfolio. So far, this enigmatic stock has drifted down from our entry by about 5.5%.

The stock has drifted down about 25% over the past year. Meanwhile, it's opening stores at breakneck pace in China... earnings are falling in line with expectations... Starbucks is doing all the right things with its employees, the model of a socially responsible business.

AND the company's green track record is unparalelled in the industry.

Yet... and yet.

It's rather depressing. And it doesn't make much sense. But the markets are not a logical place.

Stocks, like people, have their cycles and patterns... ups and downs. Right now, SBUX isn't "feeling very pretty." Its confidence has ebbed. But it's working out at the gym, getting back in shape and paying its dues (expansion into China and other emerging markets).

And that's why I agree with Moore's assessment: SBUX is overdue for a serious bounceback. Let's just hope it doesn't hit our trailing stop before the bounce begins.

Good trading,


1 comment:

Anonymous said...

In the greater scheme of things, isn't there good reason to believe it's not really sustainable for millions (billions?) of people to continue spending upwards of $3 for a cup of coffee? There's just something about the consumerist model upon which companies like Starbucks are built that prevents me from believing they can continue to deliver returns like we've seen up until now...just another symptom of the disease that is the consumption bubble we're living in.