Eye on Insiders: Starbucks

Watching insiders is like participating in a weeks-long stakeout. You expect something to happen, but you don't know what. So you settle in, sip your coffee, and wait for clues to solving the big case.

Here, the "case" is direction: Which way is your stock headed? The "clues" come in the form of insider buying and selling action. Have a look at Starbucks (Nasdaq: SBUX  ) over the past year.

Insider Rating

Moderately bullish
No sales and several purchases, the largest of which came in September at a modest discount to today's price.

Business Description

The world's largest coffeehouse chain and a globally known brand. Fast food and instant coffee offerings have reduced the company's once-premium cachet

Recent Price

$20.05

CAPS Stars (Out of 5)

**

Percentage of Shares Owned by Insiders

2.72%

Net Buying (Selling)*

$506,593

Last Buyer (% Increase)

Javier Teruel, Director
12,600 shares at $19.09 apiece on Sept. 8
(Purchase opened a new position)

Last Seller (% Decrease)

None over the prior 12 months.

Competitors

McDonald's (NYSE: MCD  )
Green Mountain Coffee (Nasdaq: GMCR  )
Peet's Coffee & Tea (Nasdaq: PEET  )

CAPS Members Bullish on SBUX Also Bullish on

Apple (Nasdaq: AAPL  )

CAPS Members Bearish on SBUX Also Bearish on

Ford Motor (NYSE: F  )
Citigroup (NYSE: C  )

Recent Foolish Coverage of SBUX

McDonald's Burns Naysayers
2-Star Stocks Poised to Plunge: Starbucks?
3 Stocks on Our Radar

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Oct. 26.)
* Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: moderately bullish
For as desperate Starbucks seems to be with selling instant coffee, each time I talk to a staffer at one of the stores, the story is always the same: VIA is doing pretty well.

Even so, skeptics still aren't buying Starbucks' story. "Unemployment is climbing faster than the government will admit, and consumer credit is contracting," wrote CAPS investor BearTill2012 last month. "Neither of these conditions bodes well for a premium coffee house like Starbucks." There's no evidence of VIA reducing enthusiasm for Green Mountain Coffee's K-cup single-cup brewing system -- and yet there's evidence aplenty that insiders remain enthusiastic about Starbucks' prospects at current prices.

Board member Javier Teruel last month opened a new position, buying 12,600 shares at $19.09 apiece -- a modest 5% premium over yesterday's close and very near what the stock trades for as of this writing. Our top analysts for the Fool's soon-to-be reopening Million-Dollar Portfolio real-money service also own shares and remain bullish. I'm tempted to side with them.

Do you agree? Disagree? Log into Motley Fool CAPS today and tell us how you would rate Starbucks.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here, or use the comments box below. I'll write this column as often as you, our readers, demand.

Apple and Starbucks are Stock Advisor selections. Green Mountain Coffee Roasters is a Rule Breakers recommendation. The Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of Starbucks and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


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