Starbucks Stock: Should You Buy Now?

I have only studied three companies in my life in which the following the following standard did not produce a good investment: Look for companies with high earnings per share growth that are supported by strong revenue growth and trading at a reasonable valuation. The only times this hasn’t worked out before involved General Electric, Wachovia, and Hostess (the first two had debt and liquidity problems, and the last had labor disputes that destroyed what should have been an excellent lifelong holding.)

Usually, high revenue growth is a sign of a business in good health. Earnings per share growth without revenue growth is likely a result of management strategy, ranging from stock buybacks to cost cuts to productivity gains. And revenue growth without earnings per share growth is likely a signal of share dilution (that’s the problem with Amazon and Facebook right now; the financial news media are often reporting … Read the rest of this article!

The Catch-22 Of Investing

I’ve been digging through the financial commentary archives of The Wall Street Journal and The New York Times to compare the tone of investment commentary in the late 1990s to the financial news in the immediate aftermath of 1987’s Black Monday in which the value of the Dow Jones dropped by 22% in a single day.

It leaves an impression to see how quickly investor attitudes changed in under ten regarding the same exact companies. On October 20th, 1987, few people were talking about the inherent quality of enterprises like Coca-Cola, Colgate-Palmolive, and Johnson & Johnson, which had been paying out annual dividend increases of almost thirty years by that time. And had been reporting steadily growing profits as well. No one cared.

Just about all common sense was abandoned. The initial prints from The Wall Street Journal and The New York Times compared the fall to the … Read the rest of this article!