Making big money in Starbucks' turnaround!
Despite its recent woes, Starbucks is the world's preeminent coffee brand with the planet's biggest distribution network. Brian has begun his turnaround with a big bang and I await the sale of its...
Even though I was not around for the 25,000% in Starbucks (SBUX) shares since Howard Schultz's IPO, I thought it was grossly undervalued at 75 last August and wrote a post for the bullish case on SBUX (https://www.linkedin.com/feed/update/urn:li:activity:7229030160409206785/). By an eerie coincidence, I had dinner with Sandeep Vyas, one of the world's top restaurant/F&B serial entrepreneurs at the Address Sky View. Sandeep had worked with the legendary Brian Niccol at Yum in Dallas before he went on to turn around Chipotle Mexican Grill after its E. coli meltdown. I had made serious money from Chipotle as it was a 4X with Brian as CEO. Sandeep told me that the grapevine strongly suggested that Brian was the white knight CEO who would replace Laxman once the board decided to wield their magic axe. Sandeep knows more about coffee and F&B than any executive or founder I have ever met in my life. But even I was stunned when Starbucks soared an incredible 25% in a single trading session once Brian was anointed as the incoming CEO. In finance, who you know is as important to process money making intel as what you know.
Despite its recent woes, Starbucks is the world's preeminent coffee brand with the planet's biggest distribution network. Brian has begun his turnaround with a big bang and I await the sale of its China business to PRC private equity. So I believe SBUX is still undervalued as 16X operating cash flow and a 2.8% div yield. I doubt if I can expect another overnight 25% windfall like last August but I still want to sell put options on SBUX as I expect the shares to move to 105-110 in the next 60-months.
I know the arguments against my long SBUX trade and even I recoil in horror at the sight of a Starbucks driven in Jumeirah but this is a stellar turnaround/technology play in global consumer brand. Manju tells me that he can get me $20 a share premium on a $110 strike with mid-Jan expiration from Chicago's CBOE. $20 on a $92 stock is free money in my psychic and flea money if I were to turn Japanese and rename myself Matti-san. Time to say domo arigato to Sandeep, Brian and Sun Goddess whose tear drops formed the right celestial island Dai Nippon. Tenno heika banzai!