For investors that are comfortable with a bit more risk, consider snapping up a few shares of Starbucks (SBUX) as a corporate turnaround play, explains Mike Larson, editor of Safe Money Report.
This is looking increasingly like a new bear market. It’s not 100% confirmed, at least technically speaking. But as I like to say, if it looks like a bear, smells like a bear, and acts like a bear, what else could it be?
That doesn’t mean we won’t be able to find any profit opportunities. There are also going to be stocks that buck the trend because they offer the right combination of defensiveness, dividend yield, and lower volatility.
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With that in mind, there is one opportunity worth targeting—Starbucks (SBUX). The coffee chain operator struggled for most of the past couple years. But its shares soared 12% on Nov. 2, 2018 — the biggest one-day gain since 2009.
The catalyst was SBUX’s fiscal fourth-quarter earnings report. It showed comparable sales growth of 4% in the Americas region, improved loyalty program growth, a rebound in Chinese sales, spending reductions and other positive metrics.
The company also released a strategic plan in December 2018 designed to increase its retail store portfolio by 6% to 7% globally, and to boost its same store sales by 3% to 4% per year. The plan will involve using advanced technology to better manage inventory, developing successful new products like its Draft Nitro Cold Brew beverage, and enhancing its loyalty program to encourage repeat business from its highest-spending customers.
Those efforts appear to already be bearing fruit. Fiscal first quarter revenue and earnings both topped expectations, while loyalty membership surged 14% year-over-year to 16.3 million. Same-store sales growth on a worldwide basis also topped forecasts by 1.1 percentage points (4% versus 2.9%).
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Throw in Starbucks' market-beating dividend yield of 2.1%, its solid Weiss "buy" Rating and the fact my two teenage daughters seem to spend half their lives and most of their money there — and you have the makings of a very interesting long-term investment.
If you can get an entry price around $60, that would be ideal. But be sure to buckle up. Markets are going to be in for a bumpy ride this year.
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