Picking Apart Past Calls

I also underestimated Target's brand. Despite Wal-Mart's size and ability to push around vendors, it couldn't crack Target's business model.

To avoid this mistake in the future, it may be better to take a long-term approach. My analysis was based on a short-term thesis that included a temporary setback in just one segment.

Starbucking My Prediction

August was a tough month for high-growth consumer-goods companies, and I suggested that investors avoid Starbucks (SBUX Quote).

That month, the coffee giant reported same-store sales that were below estimates and blamed the shortfall on record high temperatures. This led to an increase in Frappuccino orders, creating longer lines that customers refused to wait in.

This misstep, along with a lofty valuation, had me doubting Howard Schultz, the company's founder and chairman. Also, management's aggressive expansion project includes the opening of an additional 28,000 stores worldwide over the long term. This estimate takes into account that consumers in China -- a tea-drinking country -- will be quick to adopt the Starbucks brand along with its trendy ambience.

But the following month, Starbucks' same-store sales exceeded estimates, and the company said that the Frappuccino crisis was resolved. This still left the stock with a forward price-to-earnings multiple of 35 compared with just 16 for the S&P 500. It didn't matter. Shares are up 19% since my call.

There is one single reason why I was wrong in my prediction:

I doubted Howard Schultz.

In 1982, when Schultz joined the company, Starbucks sold nothing but coffee beans. He immediately outlined an aggressive expansion plan that many believed would be impossible to achieve. Today, Starbucks has 12,000 stores, and Schultz continues to exceed expectations in terms of execution and expanding the Starbucks brand throughout the world.

At the current price, Starbucks trades at 40 times next year's consensus estimates. Even at this lofty level, I will not make the same mistake twice and bet against this guy.