Michael Jordan is the best and most influential basketball player of all time. His impact on the league was immediate, averaging 28 points a game in his first season with the Chicago Bulls. Over the next 11 seasons with the Bulls, Jordan would go on to lead the team to six NBA championships and win five MVP awards.
But even Jordan's dominance eventually came to an end. By the time he made his second comeback, this time with the Washington Wizards, his abilities had diminished, and the league was now dominated by new stars like Kobe Bryant and Allen Iverson.
The game had just passed him by.
Thanks for sticking with me
Tracking former Nasdaq darlings Starbucks
Both Starbucks and Dell absolutely dominated their respective industries for many years, made tons of money for early investors, and became household names.
Unfortunately, the game seems to be bypassing these companies, too. Things have gotten so off track at Starbucks and Dell that both of their visionary founders, Howard Schultz and Michael Dell, returned to lead the companies they created in the hope of turning things around.
From Starbucks to Starcents
In addition to the higher food prices that are cutting into its margins, Starbucks is being attacked by competition from all sides, with Dunkin Donuts now moving back into China and McDonald's
Moreover, macroeconomic factors are finally creeping up on Starbucks. Unlike in the last recession, when Starbucks stores were still focused in affluent urban and suburban centers, the company's U.S. stores now stretch across the country, at interstate rest stops and inside discount retailers.
This positioning has increased the company's exposure to American consumers, who are already feeling the pinch from an imploding housing market and higher unemployment levels.
Flush that economics textbook
In an effort to boost sales, Dell has taken to cutting prices on its PCs to compete with Hewlett-Packard
As GM and Intel learned, you can only go to the price-cutting well so many times before your customers come to expect lower prices all the time. And lower prices and tepid sales growth amid higher expenses means only one thing: shrinking margins. Since 2003, Dell's operating margins have decreased from 8% to 5.9%. This is not a sign of a great company regaining its former prowess.
Where the game's just starting
While Starbucks and Dell may indeed turn things around, neither will be able to replicate the outsized returns they once gave investors. At present, at least, they look like companies headed in the wrong direction.
If you're looking to buy the next ultimate growth stock, you need to find companies headed in the right direction. In other words, companies:
- Gaining market share, with
- Price-setting power, and
- Delivering unique and innovative products.
Last February, the Motley Fool Rule Breakers team highlighted Chipotle Mexican Grill, which was adding stores at a rapid rate, expanding margins, bringing fast-casual Mexican dining to the rest of the country, and still led by its founder.
That pick has done well for Rule Breakers subscribers -- it's up 89% since it was first recommended.
If you'd like to see the other stocks Motley Fool co-founder David Gardner and the Rule Breakers team are recommending right now, click here for a free 30-day trial to the service. There's no obligation to subscribe.
Fool contributor Todd Wenning thinks MJ's "Come Fly With Me" video is the greatest highlight compilation of all time. He does not own shares of any company mentioned. Starbucks and Apple are Motley Fool Stock Advisor picks. Dell is a former Stock Advisor selection. Starbucks, Dell, and Intel are Inside Value recommendations. Chipotle is also a Motley Fool Hidden Gems selection. The Motley Fool owns shares of Starbucks. The Fool's disclosure policy will take your breath away.
