Getting Seconds of Starbucks

This article is part of our Real-Money Stock Picks series.

It's been nearly a year since I bought shares of Starbucks (Nasdaq: SBUX  ) for the real-money portfolio I'm managing for Fool.com. What a year it has been. At one point, Starbucks shares jetted to about $62. Since then, it has receded closer to the price of my original purchase.

Granted, the investment's 20% return as of this writing is nothing to sneeze at. However, as long as Starbucks' shares have cooled from earlier highs, I'm going to add a bit more Starbucks to my prosocial portfolio. After all, Starbucks is one of my favorite picks given its many positive attributes, so I'd like to give it a little bit more weight in my portfolio right now.

In the last year, Starbucks has made many interesting and differentiating strategic moves that convince me there are plenty of growth opportunities left ahead. Although its arrangement to provide K-Cups through rival and partner Green Mountain Coffee Roasters (Nasdaq: GMCR  ) was a smooth move to woo Keurig users, Starbucks will launch its own at-home espresso machine this fall.

Buying the Evolution Fresh brand and opening its first juice bar is one of the ways Starbucks may squeeze out a smooth blend of opportunities, not least of which is challenging Jamba Juice (Nasdaq: JMBA  ) and providing healthy and even vegan fare for those with discriminating tastes.

Starbucks' purchase of French-inspired La Boulange bakery is also a bullish sign. It could certainly help the coffee giant offer more tantalizing fare to its own customers, and better address Panera Bread's (Nasdaq: PNRA  ) share of the higher-end quick-serve-and-hang-out market.

Meanwhile, as corporate America has continued to disappoint the American public on many levels, Starbucks founder and CEO Howard Schultz has been outspoken about politics, the domestic marketplace and climate, the need for jobs, and economic shared fate as elections loom. The Indivisible campaign is part of that public outreach for conversation and communication, and Schultz is proving himself a true leader in more ways than one.

Starbucks trades at 23 times forward earnings, which is about on par with Panera and far more expensive than the forward multiple of nine attached to Green Mountain. Investors could get an even cheaper quick-serve stock by investing in McDonald's (NYSE: MCD  ) , which has also receded from recent highs and trades at just 15 times forward earnings.

Still, Starbucks is a socially aware company that's obviously planning for and investing in continued growth well into the future. I believe it's a positive time to pour some more Starbucks into portfolios.

On the flip side, it looks like the cup could be running dry for Green Mountain Coffee Roasters. With the Starbucks Verismo on the horizon, as well as the impending expiration of key K-Cup patents, there's no shortage of things for investors to worry about with the company. If you're already a Green Mountain investor, or want to learn more about what opportunities it might present at nine times forward earnings, make sure to check out our brand-new premium research report on the company. It comes with a full year of updates when key news hits, so you'll always stay up to date with our analyst's insights. Click here to learn more.

Alyce Lomax owns shares of Starbucks in her personal portfolio. The Motley Fool owns shares of Panera Bread, Starbucks, Green Mountain Coffee Roasters, and McDonald's. Motley Fool newsletter services have recommended buying shares of McDonald's, Panera Bread, Starbucks, and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended writing covered calls on Starbucks. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain Coffee Roasters. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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  • Report this Comment On August 21, 2012, at 8:34 PM, ayalara wrote:

    C'mon folks. The public is as fickle about coffee vendors as is it is about clothing fashion. Show me the moat.

  • Report this Comment On August 26, 2012, at 7:44 PM, mkrusi wrote:

    I am concerned Jamba has put a hold on hiring and has been discounting beverages for the months of July and August.

    I think the $5 smoothie was the American dream and not the reality of today.

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