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!

My Big Investing Mistake of Omission

One of my favorite speeches of Charlie Munger, which Warren Buffett co-opted when he spoke at Florida University, was the story of how to turn $40 into $5 million. It was a story about Coca-Cola stock, and the conditions that can lead to super large financial rewards based on modest financial investments. The premise is this—you need a product that is super cheap to make and possesses enough brand equity that people will buy it deliberately on a regular basis.

Even before I encountered this story, I knew that the beverage industry has been a very lucrative place to make money if you want to make an initial investment and then grow richer in the coming years without having to do anything. Diageo, Anheuser Busch, and Brown Forman all have long records of growing profits per share and dividend payouts that are significantly higher each decade than the previous.

Pepsi … Read the rest of this article!