Starbucks (SBUX)

(A Top Pick May 9/17, Down 19%) It got whacked very recently. Last week they put up some bad news. That is what happens in the US when you change your story. Coffee land is competitive. It is a good global franchise that has done nothing.p

Over three years, it's been sideways. He sold his shares because valuations were stretched. The CFO is retiring, they're shutting some US stores, and strong competition overseas. True, they've gotten into juices and other areas which has helped, but consumers can always switch to another brand. Be careful with this now. Watch their next report; their last quarter was weak.

Owned it and sold it a while ago. Great franchise. Great name. Valuation is pricey. He doesn’t see a catalyst for the next leg up for this particular name.

(A Top Pick April 27, 2017, Down 2%) Has underperformed for three years. It's been in a tight $59-68 range. Still loves the name. The market's love will return, though he won't increase his holdings. Earnings are up. PE is nearly 24x forward. It does well through bad economic times. It's one of his biggest holdings. Doesn't feel their stores are oversaturating markets.

Makes sense as a long-term hold. Locally, we'll see more competition. It'll continue to grow globally. Innovative on the product side, such as introducing alcohol sales at night. One problem is that the CEO left came back and now gone. Investors ask, How is it going to be run? Markets are waiting.

Over time, this has been a good holding. However, it’s had a very volatile year since 2016. Partly because the restaurant group has not been in favour, and partly because the company has his own issues. They've grown their dividend 24%-25% a year over the last 4 years. However, this is a sector that is not terribly economically sensitive. If you are going to be in the consumer sector, he would prefer something that is in the travel/leisure space, and would look at a Marriott (MAR-Q) or a Carnival Cruise Lines (CCL-N).

This has done extremely well. It’s always been a fairly high valued company. Because of that, he has stayed away, but has a great deal of respect for the franchise and what they’ve done. China is doing extremely well for them, and is very exciting. However, domestic operations in the US, and to some extent in Canada, are suffering from a lack of traffic. If it was a lower multiple company, he might be a little more excited, but there are too many other exciting opportunities.

It is brilliant. It will carry on. It is innovated. Nobody will ever catch it up.

They are expecting 17% earnings growth next year. She likes it right now because it is not really in favour. It looks like a nice attractive value. This is a good buying opportunity.

Just reported earnings after the close, and thinks they missed on some of their numbers. This company has a very unique brand, and has room to grow internationally. There is certainly lots of international expansion. They are unique in that if there is change, they understand that they have to change, and have been able to do that effectively. On a decent pullback, he would Buy this.

Valuation has been excessive for a while. Same-store sales growth in the last little couple of quarters has been slowing down. Their expansion has started to get a few headwinds. Did a fantastic job of reorienting their company a couple of years ago, and the stock reflected that. Not sure he would be jumping in at this time. There is too much competition in this market.

This has been a frustrating year. He is buying and averaging down. There are 2 parts to the story. There is the domestic story. They came out with some revenue and growth rates in North America that people were not expecting. Thinks it is going through a soft landing. We are used to the high growth rates which is coming down a little. The real story is the China side, where they have 2600 stores and are adding 500 stores a year. As long as China/US relations stay good, he believes this company will continue to see great rewards out of that region. The drop in the stock price is a good buying opportunity.

They have tried very hard to have card holders. 45% of transactions are now done on a non-credit card/non-cash basis. It helps them cut costs. The growth will be international. The stock has trended sideways for a while.

He trimmed some after owning it for a long time. He thinks it is about ready to go again. It is a case of getting money to flow into that sector. It’s an international story.

SBUX-T vs. QSR-N. He sold SBUX-T because the same store sales were weakening and that is happening for QSR-T as well. Both are not too cheap. There are headwinds in theses names.