Starbucks (SBUX)

(Market Call Minute) An expensive stock but if you have a longer term horizon, then it is a stock you have to own.

Capital protection is what she focuses on so it is really hard to justify paying for growth expectations, even though the company is growing at a good clip. Too expensive for her.

Premier company in coffee shop business. Had a humungous run and eventually valuations got out of line. It could take a while for it to catch up. If you are short term you might want to lighten up for a while.

Trading at 30X estimated earnings. Make most of their money in the US and China. They are innovators and have expanded into tea, juice and good bake offerings and are getting into the supermarket channel. Not making a lot of money in Europe, pretty well breaking even. There are a lot of things they can do to get this going. Not cheap, but with a growth rate of 20%+ they can justify a good PE multiple. Dividend yield of 1.28%.

Premier company in coffee network. Messed up in their grocery screw up but it is a small amount of money in their context. Very rich multiple even though it is doing very well. All of the coffee shops except for MacDonald’s are off his scale because he is a value investor.

30 times earnings, which she thinks is too much. A lot of the value generated is from the future.

Tim Hortons (THI-T) or Starbucks (SBUX-Q) for a three-year hold? This one has more of a global franchise along with the Teavana and the new juice business that they are getting involved with. If push came to shove, he would say put your money in and buy both but if you have to pick one or the other, he would go with Starbucks.

Tim Hortons (THI-T) versus Starbucks (SBUX-Q)? He definitely prefers this over Tim Hortons. This is a global company with a great brand that is continuing to grow its business. Using its balance sheet to diversify away from coffee. Very strong balance sheet. A tailwind is that coffee prices are at an all-time low so margins are increasing. Buy this on any dips that you see.

Thinks the growth strategy they have is just fine. The brand is iconic. Valuation has always been expensive, but the question is, can they pull through earnings over time. They are starting to develop offering beyond coffee.

Better growth rate than THI-T. THI’s ability to move out of Canada does not have a great track record. SBUX has an amazing platform. He is moving that brand onto grocery stores. Has a better prospect for growth.

Chart shows a strong upward trend. Seasonality this is the time. It has gone straight up throughout the whole year, which is a very positive thing. As far as taking profits, he would be looking at later in the year at around April. As the market moves, this will continue on.

Trend of this is clearly higher. There is support at the 50 day moving average. Even the momentum indicators are clearly positive. Seasonably, this is not in favour at this time of year. Seasonality is usually January through to June where it has an average gain of about 20%.

Great company and resurrected in the last few years but it is just too expensive. When a company trades at 32X earnings, he sees a lot of air under the stock if they fail to perform.

There is more room for this company to grow because their penetration into China and international markets is quite low. Chart looks great but little expensive for her at 35X current earnings and 31X forward earnings. These types of names you want to buy when they stumble.

Thinks the story has turned around nicely. Not cheap but thinks there is some very good growth in it. US consumer is doing well which is going to help them. Still have lots of growth internationally. Expect you will continue to see reasonably good earnings growth. You are paying a higher multiple so you have to accept the volatility that goes with that.