Get on the Starbucks Bandwagon

 | Aug 16, 2011 | 10:57 AM EDT  | Comments
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Not only would I take the pledge of Howard Schultz, the Starbucks (SBUX) CEO, not to make political donations until the gridlock in Washington is solved and leadership restored, I would also use the weakness to buy his company's stock.

Here's why: My fantastic CNBC co-host Melissa Lee this morning asked Schultz a terrific question about coffee pricing and how J. M. Smucker (SJM) just cut prices by 6% because of a dramatic decline in futures prices for green coffee. Smucker is huge in coffee, producing Dunkin' Donuts and Folgers, among many other brands. Melissa wanted to know if Starbucks is going to cut prices. Schultz did not say he would. Given that the company just put through price increases responding to a previous run-up in the futures, gross margins could go up dramatically. Considering that sales have not been hurt at all by any of the recent political turmoil, again something Schultz confirmed, you may have the makings of a nice upside surprise.

Layer this on top of the fact that Starbucks had a 30% same-store sales increase in China, which is incredible, and that expansion goes on apace and the American stores are going great guns, and I think that Starbucks, which is down sizably from when it reported, has to be bought here.

I've been recommending the stock pretty much from the moment Howard came back to run the company, as I knew he could engineer a turnaround. The turnaround phase ended a long time ago. Now it is all about growth, and it's growing in spades.

It remains the premier restaurant story around the globe, rivaled only by McDonald's (MCD), and that's a tough competition only because McDonald has a bountiful dividend that will always make it supremely attractive.

Schultz is stepping up to offer leadership in politics. Given the leadership he exerts at Starbucks, I bet he makes an impact. Investing with him has always been a great call.

This time is no different.

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