Tim Brown: Starbucks Can Be a Star

Here's a stock I think has some legs as well: Starbucks(SBUX Quote).

Now the stock is definitely beat up -- there's no arguing that. It's lost more than 46% of its value in the last year and closed yesterday at just $14.52. Typically, I pick companies with strong balance sheets.

However, Starbucks' financials aren't outstanding by any means, but they are good enough. The company has a forward price-to-earnings ratio of 16.13 and a return on equity of 19.39% -- both decent numbers. Its institutional support is a little low at about 64%. Revenue stands at $10.31 billion.

However, sometimes it's more important to look beyond what's in its financial documents. Starbucks has been beaten down, in part, because of rising competition, overexpansion and rising costs, including that of milk. True competitors, such as McDonald's(MC Quote) and Dunkin Donuts, are vying for more traction in the high-end coffee space.

That said, I believe the company has done a number of things to address these issues, and I like its management and its plans for the future. First, the company announced earlier that it was shutting 600 stores in the U.S., which should help keep some costs down while filling the stores that are open. Besides, it seems there is a Starbucks on every corner anyway.

Since the U.S. is satruated with stores, the company is looking to take advantage of its brand recognition overseas, which makes a lot of sense to me. And, as for the rising costs, they are the same for everyone in the space, so I am not as concerned about those.

Plus, Starbucks has great brand recognition and customer loyalty here in the U.S., so I don't see its competitors encroaching substantially on the Starbucks' clientele.

It's not always about the obvious choice.

Boldin is my favorite receiver and Starbucks is a great play for you today.

Keep moving the chains!