Starbucks (SBUX)

(A Top Pick Feb 13/14. Up 12.03%.) Expanding into the food space and into more of the breakfast areas as well as beverage areas. More importantly you have a rebounding US economy with consumers feeling a little bit more confident and a labour market that is getting better.

When looking at US dividend growers and dividend payers, you want stocks that have good predictability of income as well as being a good secular growth story. This is exactly what this one is. Expects there will be operational efficiencies in the next year. They are going to benefit as they expand into other geographies. About 75% of their income comes from North America and you really haven’t seen that coffee culture develop in emerging markets. That will coincide with a big increase in the low to middle income households. Valuation is reasonable. Thinks they will be able to deliver 20% growth across the board longer-term. Yield of 1.61%.

(A Top Pick Dec 2/13. Down 0.80%.) Thinks they are the best coffee chain out there. The thesis is always making more money out of things like China and selling more and varied products to their customers. Things haven’t changed, but the challenge is that it is a high multiple stock, so any time the market has not done well, you are going to see this fluctuate quite a bit more. However, he does think they are going to create value and continue to justify the high multiples.

Hasn’t been a spectacular performer this year, but is moving into food and wine with a big movement into China and eventually into India. Have great metrics and great earnings. Yield of 1.62%.

20,000 stores in 60 countries globally. This is a stock that has taken a bit of time off and hasn’t done a heck of a lot, although it hit a new high today, which technically could be a pretty interesting formation. A premier large cap growth name. Doesn’t think you can find a name in the space that is similar to this. Expanding into tea, juices as well as fresh food offerings and alcohol in the US. Yield of 1.57%.

For long-term hold, would it be Starbucks (SBUX-Q) or Disney (DIS-N)? He doesn't own either. They are both fairly expensive with this one trading at about 25X earnings and Disney at about 20X. Regarding growth metrics, this is probably a little bit growthier, but he feels it has some risk. If he had to choose one, it would probably be DIS-N.

Reporting in the next little while. Over 5 years, it has done very, very well and there is no reason to think that this won't continue.

He tends not to buy companies like this with their kind of multiple level. This is a remarkably great concept. They have growth, but you are paying for it.

The sector should continue to have a tail wind: falling energy, commodity and food prices. Has close to 80% of revenue in the US so it is a proxy on the US economy. It is not the strongest stock in the group. See it consolidate before getting in.

It has been going sideways for the last little while. A trading range for the last year. Wait until technicals become better. Trend is flat and is below its 20 day moving average. Seasonally it does well from July to about now and then you should go into more economically sensitive securities. We have not seen any performance on this stock over the past year.

(A Top Pick Dec 2/13. Down 4.25%.) There have been some challenges like higher coffee prices, but the main reason they have dropped is that there has been talk of slower growth, especially given the shootout performance they had last year. Executed better than what the street expected. Sales continue to be strong. Still likes.

Always an expensive stock on a multiple basis. The great thing from an investor’s standpoint is that they can trust that it is going to have a good growth profile going forward, so it gets a premium valuation, something like 25X. At this price, this is less attractive. They are probably going to grow in the mid teens. It also depends on the price of coffee. More appealing in the $70 range. His target would be around $80-$85.

Walt Disney (DIS-N) or Starbucks (SBUX-Q)? Neither. He only likes recommending the companies that he owns and follows. However, these are wonderful, wonderful companies and if you were to hold them forever, you probably would do very, very well. He would prefer Tim Hortons (THI-T). Valuation is a lot cheaper and the Return on Invested Capital is amazing.

Thinks this is overvalued at this time. This is a case of a really great company, but a not so good stock. Stock has been bid up to a point where it represents some risk. At 30X earnings there is a lot of air under the stock price.

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.