Seattle Companies Are in the Beast Mode

 | Jan 24, 2014 | 5:34 PM EST  | Comments
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Bet the farm on Seattle.

No, not the Seahawks, although I like them very much to beat the Broncos.

I am talking about betting on the companies that are from Seattle because they, like running back Marshawn Lynch, are in beast mode even with a market that suddenly feels like it's getting the Orange Crush.

Just think about it. Which is the best performing Dow stock last year? Boeing, (BA) which, while based in Chicago, has its biggest factories in the Seattle area. Which company is playing havoc with all of bricks and mortar retail? Amazon (AMZN), the Seattle-based online colossus. Which company delivered the best consistent growth of any retailer through this rough period? Costco (COST), the Seattle-based big box club store chain.

And two, which two companies put up numbers so incredible that they bucked the worst day in ages? How about Seattle-based Microsoft (MSFT) and Starbucks (SBUX).

The former was a real shocker. For years we've been frustrated with Microsoft as there always seemed to be something that went awry, some line of their business that stalled or failed or missed expectations. We grew tired of the excuses and couldn't believe that the company could miss the social, the mobile and the cloud, the holy trinity of tech, that should have been so obvious to both Bill Gates and Steve Ballmer, but somehow passed them by.

That's one of the reasons why the biggest move this stock had in ages came on the heels of the resignation of Ballmer who simply failed to see many of the biggest trends in tech and Microsoft, as huge and powerful as it is, became an also-ran in the tech space.

But today, the last real quarter of the Ballmer regime before he steps down, the company put it all together with great numbers from Windows, from enterprise software, and most importantly from the Surface and the XBOX franchises. It was a truly terrific performance and I believe the stock would have been up maybe twice as much as it is if the day had been a less chaotic affair.

The real winner out of Seattle though, the one worth devoting some real time to, is Starbucks not just for what the company did, which was amazing, but from what its incredible CEO, Howard Schultz, one of my Bankable 21 CEOs from "Get Rich Carefully," said on his conference call.

First, I am always telling you that you have to listen to the conference calls to find out what's really going on and match that to the expectations that were expected of the company going in. The Starbucks quarter and its aftermath represented everything that's good and bad about the stock business and why I am always confident that people at home can trump the wise guys when it comes to long term wealth creation.

I was watching CNBC when Starbucks reported. There were some headlines on a bunch of services when the number hit that immediately pronounced the quarter a disappointing one. Instantly the stock sank from $73 to $71 in after-hours trading as the stories declared the quarter a big miss.

The sellers, however, got it totally wrong, in three different ways. First, they didn't understand that the stock had been going down for days ahead of the quarter as people expected the company to issue earnings short of the consensus. In fact, the numbers were basically in-line, which didn't fit the scenario of the decline that had already occurred before the report, let alone the foolish one occurring after.

Second, the headlines picked up that there was a slight disappointment in the U.S. this quarter but didn't acknowledge that the incredible turn in Europe, which was, frankly, monumental and much more important than any slight slip in the U.S.

Finally, because the headline writers and the Quick Draw McGraws didn't wait to hear the guidance for the future they didn't know that Starbucks had sold a huge number of gift cards, far more than anticipated and that will produce a huge shift of revenues into the first quarter, far more than what might have been missed in the quarter just reported.

Remember, we care more about a company's future, not its past and this gift card news was nothing short of fantastic for the earnings projections. You could not have learned about it from the headlines though, you needed to hear it on the call.

What else did the headlines miss? How about excellent sales in China even though right at the beginning of the quarter the Chinese government TV station did a half hour slam of Starbucks for gouging Chinese with ultra-high coffee prices?

How about the incredibly fast start in India that could produce some very meaningful numbers later this year? How about the success in remaking and remodeling Starbucks, including adding drive-through and offering more food that makes it so that the Starbucks experience is no longer as morning-centric.

But the real thrust of the call, something that couldn't be captured in the headlines at all, came at the very beginning of the call when Schultz traced out what he called a seismic shift in retailing that occurred this very quarter past: the twilight of the traditional bricks and mortar mall shopper vs. the rise of the device toting home shopper and what it means for retailers of the future.

Schultz pointed out that many commentators have blamed weak holiday sales on the weather, the shortened period between Thanksgiving and Christmas and the government shutdown. Schultz dismissed those almost entirely. Traffic, he said, went down because America's changing. This was the year where people decided that they like shopping online more than they like going to the mall and they aren't going to go back. It's a secular change and it is just starting.

But, he said, Starbucks saw this coming and has been able to embrace digital, embrace mobile and embrace social in ways that have made Starbucks not immune, but more immune than other retailers. The technology they have invested in has allowed lines to move faster, giving the company a chance to add more complex items, liked baked goods, carbonated drinks and special coffees to the menu without slowing down the through-put.

Most important, Starbucks, by virtue of its principal product, coffee, does not compete with cross town neighbor Amazon. Or to put it another way, Amazon's got the original beast mode on offense, Marshawn Lynch, but Schultz is the equivalent of Cramer uber fave Richard Sherman, a defensive playmaker that is capable of winning the Super Bowl of retailing just like I think he could win the actual Super Bowl for the Seahawks.

There was so much else that was fabulous on the call. I like the rollout of Teavana that's just beginning and I suspect that it will be a gigantic driver in the out-years. I thought that the analysis of how people like gift choicing -- meaning giving a gift card to people has now become engrained in the culture. I like that those who get gift cards for Starbucks are often people who have never been to one and not only will they buy some coffee but they might be swayed into some of the other new food offerings with high price points.

But here's the bottom line: on hideous days like today you have to remember that just like Pete Carrill might make you want to bet with the Seahawks Howard Schultz makes you want to invest in Starbucks because he is the very embodiment of the Bankable 21 that I salute in "Get Rich Carefully," the CEO coaches who win even when, on a day like today, all others around you are losing.

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