The Stock I Bought, and the One I Wish I Had

Hindsight is 20/20, and nowhere is that more apparent than in the stock market. What looks like a great buy might have had some warning signs you missed, and what looks like a longshot can take off overnight.

Factor in the oft-cited but also oft-ignored "buy low, sell high" advice, and it's easy to overlook a great stock. Here are two stocks I've been following, both strong on international growth. I bought one of them, and wish I had bought the other.

Relief from the red-eye
A layover in Hamburg. An overnight flight to Sydney. Say what you will about the dying art of the local coffee shop, but I find few things more comforting than that green mermaid waiting for me upon my arrival. It is that most tempting of siren songs, and were there rocks between the kiosk and the gate, they would no doubt be strewn with weary travelers.

Clearly I'm not the only one who feels this way. Starbucks (Nasdaq: SBUX  ) has become as ubiquitous to global travel as luggage and a neck pillow. Nowhere is that more apparent than China, where Starbucks is popping up faster than those little green houses on a Monopoly board. The company opened locations in five new cities (bringing the total to 41) and its 500th store, in the last quarter.

Unlike Tim Hortons (NYSE: THI  ) , whose rapid growth overseas concerned me in light of their problems at home, Starbucks seems to have managed the art of controlled growth. Earnings are up 10% for the first quarter, revenue and total assets have grown year over year for the past five. Sure, the company will continue to battle rising commodity costs, but so will its competitors, which will keep the playing field level. With key new partnerships in India and China, Starbucks' reach will only continue to expand.

Starbucks had troubles with overexpansion in the past, and when former CEO Howard Schultz returned in 2008, it was amidst a troubled economy and an oversaturated market, and he immediately closed droves of Starbucks stores in the U.S. He'll have to guard carefully against over-caffeinating the world stage. But this is a man who literally wrote a book on how Starbucks learned from its mistakes. Let's hope he learned from that one.

First-class ticket
This past holiday season, luxury spending was up, while mid- and lower-market retail continued to lag. One company thriving in the down economy was Coach (NYSE: COH  ) .

There are a number of reasons for Coach's continued success; it has grown revenue year over year, its operating margins are at 30%, it has nearly $1 billion in free cash flow, and only $23 million of debt in the most recent quarter. Annual revenue for TTM was nearly $4.5 billion. 

Building on these strong operating efficiencies, Coach enters 2012 poised to excel overseas. In the last fiscal year, Coach assumed direct control of its retail businesses in Malaysia and Singapore. And the company now has a non-controlling interest to expand its international business in Europe. Last year, it also opened new retail locations in Spain, Portugal and the UK. "Travel retail" sales (i.e. airports) also account for a large portion of Coach International's revenue.

Eenie, meenie …
Both Coach and Starbucks are Stock Advisor picks (by Tom and David, respectively). Both have strong, long-standing leadership; Coach CEO Lew Frankfort has been with the company for thirty years and grew it from a $6 million cottage industry to a global powerhouse. Since his return, Schultz has brought Starbucks back from the brink.

I've given both stocks a thumbs-up in CAPs. Ultimately, I bought stock in Starbucks. It's a great stock, and one I plan to hold long-term. I'm keeping my eye on Coach and think it might become part of my portfolio in the near future. Why do I wish I had bought it? Had I paid attention to fellow Fools when they first started talking about Coach a few months back, I would have done quite well; its stock price is up more than 50% since August and all indications are the company will continue to thrive.

How you can learn from my mistake
I overlooked Coach because it wasn't a company whose products I use. I ignored Tom Gardner's recommendation, and I missed out. But you don't have to. See what Gardner is recommending this month by trying a free, 30-day trial of Stock Advisor, or any of our newsletter services.

Have a stock you wish you had purchased? Tell me about it below.

Molly McCluskey owns shares of Starbucks but still can't get free refills. The Motley Fool owns shares of Coach and Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks, Coach, and Tim Hortons. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 09, 2012, at 4:50 AM, fvgetcom wrote:

    Hi, Molly--

    I'm new. This is my first post & I'm kinda shy about it. But, I couldn't resist letting you know that you weren't the only one shocked by how well Coach does. So was I!

    Not being very fashion-conscious, I wasn't aware of Coach until I started covering shopping malls on my travel website. When examining the in-bound keywords to my mall pages, the name Coach kept coming into view...and I got curious.

    So, I did the research & built a web page about the types of products the company sells & where readers could find their locations in Southern California. Wow, did the traffic ever surprise me for THAT page! That was back in 2007, right before the recession hit. Since then, the traffic to many of my mall pages has slowed down, but thousands of people a month keep looking for info about Coach...to this very day.

    In fact, I've expanded my coverage about Coach several times; I now have 4 or 5 pages about the subject (and all of them bring in good traffic.) Although I haven't bought any stocks yet, Coach has certainly been financially rewarding to write about (from the ads that I have on those pages.)

    The products are very well-made. Despite their lower price compared to other luxury brands, purchasers are getting every bit as high a quality product. (Just less mark-up for exclusivity.)

    During the recession, my site's Outlet Mall pages soared as the "regular" retail mall pages lagged. Here's another spot where Coach excelled; they were an early-adopter of factory outlet stores. They rarely meet an outlet mall they don't like...and as I understand it, the company's sales in outlet centers are an extremely significant portion of their income.

    They've got such a wide range of products, as well. The original Coach bags were made of leather ('cause the guy who started it all was a baseball coach looking to find a way to make baseball gloves softer & more pliable.) So, yes, they still have the beautiful soft-as-butter leather bags.

    As time went on & the interest in visibly-branded "signature" fabric bags grew, they expanded their foray into fabric products, too.

    And more recently, they've started making a line of very youthful & colorful bags...trying to get the next generation started into liking their products.

    For 2011, Coach started expanding its outlet mall presence by adding Coach Men's outlet stores. I guess the test period went well, because they're going gung-ho on that expansion project. (I'm not really seeing the incoming keywords which show an interest from my readers in the men's line...but maybe men shop without searching first, who knows?)

    It was very interesting to read about these financial details of the Coach company. If you decide to buy the stock, I hope you do well.

  • Report this Comment On February 09, 2012, at 9:12 AM, XMFAlaska wrote:

    Hi fvgetcom. Thanks for your note, and for sharing your experiences. That's really interesting to hear that Coach is driving so much of your web traffic. I'd love to hear more as things progress. Please keep me posted.

  • Report this Comment On February 09, 2012, at 9:42 AM, stevensinger wrote:

    I bought my niece Coach in October 2008, after it fell about 40%, because it was a stock I thought she'd be interested in that might spur her to watch the market (that and Viacom). It's up about 400% since then (Viacom up about 300%). I kept none for myself. I'm going to go be sick now.

  • Report this Comment On February 09, 2012, at 10:14 AM, TMFGortok wrote:

    I regret not getting out of debt sooner so I *could* invest.

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9/19/2014 4:01 PM
COH $37.05 Down -0.28 -0.75%
Coach CAPS Rating: ****
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Starbucks CAPS Rating: ****
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Tim Hortons CAPS Rating: ***

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