Starbucks (SBUX)

Fantastic business. In the long term, they will continue to win. It is the giant in the space. The near-term pullback was consciousness around the consumer and coffee prices. This is a long-term core holding if you have a 3 to 5 year time frame.

Well-managed company and very innovative. Doing their best to bring on new technologies and new products. There has been a bit of a squeeze lately with rising coffee prices. Expects there will be more international expansion as well as broadening out its product category.

Got up to about 12X its BV. Historically, that is the highest the stock has got to in 25 years. When stocks get to their old highs and run out of upside, the best you can say is “Good Luck. I am going to switch to someplace else.”

Everywhere you turn, you see their shops which seem to be taking over the world. Have done very well spreading the concept of expensive coffee globally. The biggest driver right now is actually China, but an additional driver is actually Europe. Even though there are a lot of Starbucks in Europe, they are not making a lot of money there because of a lot of competition. They are trying to fix that. On top of that they are bringing out innovative loyalty cards, instant coffee and into the supermarket channel. Also, bringing out a breakfast and lunch menu. Not cheap, but with the bit of a slowdown, he is seeing opportunity this year. Yield of 1.46%.

Doesn’t have as much yield as he likes, but growth is quite phenomenal, especially in Asia. They have really focused on growing in China and India and the demographics are really positive for them there. It continues to reinvent itself. Acquired Teavana because in a lot of the emerging markets, tea is more popular than coffee. Looking out 5 years, this company has the growth that he wants.

(Top Pick March 14/13, Up 27.32%) You pay a little more in terms of PE ratio for this one. Expansion into India and China. Every time you go in, you spend more. He added a couple of months ago.

Doing a lot of great things. Sold his holdings on concerns of valuation and the 70% increase of coffee prices this year. This is a big part of their cost structure. At an interesting level and he is watching to see how it trades. Trading additional levers that it can pull to diversify itself away from the core coffee business. Trying to offer a lot of different things to increase the amount of money spent in stores. Next quarter is going to be an interesting one. Valuation is too expensive for him.

Has 20,000 stores globally. Expanding into China and India. Beefing up the menu by offering baked goods. Really good balance sheet and fundamentally it is a very sound company. Did a very successful test market of 45 stores in the US where they were offering alcohol in the evening. Now they are going to start offering alcohol in all stores. This will take a few years. Customer base is probably more affluent than that of Tim Hortons (THI-T). Thinks the long-term of this company is going to do very well.

(Market Call Minute.) The business is becoming more and more competitive. They are the leader, but competition is strong.

Very good company. A longer international growth play but the PE kept her out of the stock.

Likes it. Coffee prices last year declined last year 38% and he didn’t see any prices go down. Recent price increases should be easily absorbed. Had a bit of a flat spot but one of the better consumer stocks. The margins are incredible. They are not a problem for them.

Not a cheap stock, but the key question is, can they continue to grow at the same kind of rate. It is the dominant coffee chain in North America, but not making a lot of money in Europe, Africa, etc. so there is a lot of room to clean up their business and make a lot more money. Rapidly growing in China and developing countries. They are also bringing out new products. Even at 20X PE, it is reasonable.

20,000 stores globally and growing. 63 countries. A premier growth name. Very well recognized around the world. Expanding into teas, juices and premium baked goods which will add to its bottom line. He is looking at 15% plus earnings growth.

Has corrected 15%-16%. Had a little bit of worry over the holidays about what their foot traffic would be. Got that out of the way. Same-store sales were a little bit down but margins were completely intact. Howard Schultz understands the changing consumer. They are a big beneficiary of the high end consumers, who continue to do very well in this economy. Have the convenience of the mobile app, the high end of their foods. They are going to start taking over and competing against high-end names with the lunch crowd. European story looks really exciting and the China situation looks really good.

An inexpensive stock. Whenever you see companies disappoint and multiples are high, there is a lot of air under those multiples. They can go from $25 to $12 in a heartbeat.