3 World Champions for Your Portfolio: eBay, Las Vegas Sands, and Starbucks

Citigroup has recently released its updated "World Champions" list of globally dominant companies with strong forecast performance. Among that group, eBay (NASDAQ: EBAY  ) , Las Vegas Sands (NYSE: LVS  ) , and Starbucks (NASDAQ: SBUX  ) stand out as particularly promising candidates with rock-solid competitive strengths and attractive potential for growth.

Placing a bid for eBay
eBay has been making a lot of headlines lately because of the controversy related to activist investor Carl Icahn and his proposal for a split between the company's e-commerce operations and digital payments platform PayPal. Icahn and eBay's management seem to have reached an agreement, so there will probably be no PayPal spinoff in the short term. However, the debate still shows that there is a lot of value to be unlocked in eBay over the coming years.

Source: eBay.

Online commerce and digital payments not only complement each other, but both business segments are also supported by self-sustaining competitive strengths because of the power of the network effect.

Buyers and sellers choose the e-commerce platforms and payment methods that offer access to more counterparties. The service becomes more valuable as it grows in size, and this attracts more users over time, creating a virtuous cycle of growth and increased competitive strengths for eBay in both its e-commerce and payments operations over time.

eBay is doing a sound job at adapting and thriving under the mobile paradigm, a key factor considering recent industry trends: Mobile users represented 40% of eBay's 36 million new users and accounts in 2013, generating $35 billion in enabled commerce volume, an 88% annual increase versus the prior year.

Las Vegas Sands is no gamble
Las Vegas Sands is uniquely positioned to profit from booming gaming demand in Macau, the only region in China where gambling is legalized. Las Vegas Sands owns approximately 56% of the hotel rooms among gaming operators in the region, and it has ambitious growth plans in the medium term. The Parisian Macau, Las Vegas Sands' sixth property in Macau, will add 3,000 rooms to its capacity in the region by 2015.

Source: Las Vegas Sands.

Macau is Las Vegas Sands' main market, and performance has been truly extraordinary lately. Las Vegas Sands reported a 28% increase in Macau revenues to $2.53 billion in the fourth quarter of 2013, while net income in the region increased by 40.4% to $655.6 million during the period.

China's middle class is expected to triple in size between now and 2023, and discretionary spending in areas like gaming and leisure is particularly sensitive to rising income levels, so the gaming industry in Macau is supported by strong secular tailwinds.

Besides, improvements in transportation and infrastructure will make it easier for travelers from all over the world to visit Macau in the coming years, providing another growth driver for Macau casinos in general and Las Vegas Sands in particular.

After announcing a big dividend increase of 43% for 2013, Las Vegas Sands pays a dividend yield of 2.6%, so the company is translating growing revenues and cash flows into generous capital distributions for investors.

Starbucks offers caffeinated growth opportunities
Starbucks is a unique company in the coffee business: brand value, a reputation for quality, and a differentiated customer experience allow Starbucks to charge superior prices for its products, and this means higher profit margins for investors.

Source: Starbucks.

Starbucks has produced extraordinary growth in recent years, and the business continues performing remarkably well according to recent financial reports. Starbucks reported a big 12% increase in sales during the quarter ended in December to a record $4.2 billion on the back of a 5% increase in global same-store sales.

Even in the Americas, where market penetration is notably high, comparable-store sales increased by a healthy 5% during the quarter. In the China/Asia-Pacific market, where Starbucks has a lot of room for expansion, the company delivered a whopping annual increase of 25% in total sales, so international growth has a long way to go, judging by demand strength.

In addition to store base expansion, Starbucks is broadening its product offerings by adding new products such as tea, juice, and pastries to its menu. The company is even expanding into beer and wine in select locations, which could provide a big boost to sales and profit margins if it turns out to be a successful venture.

Bottom line
Investors should never blindly follow investment recommendations from banks or brokers, or anyone else for that matter. However, there is nothing wrong with looking for ideas among these recommendations, provided you are willing to do your own homework to analyze whether these companies fit your overall strategy and portfolio needs. Among Citi's "World Champions" list, eBay, Las Vegas Sands, and Starbucks stand out as three particularly solid investment ideas.

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