NEW YORK (TheStreet) - Starbucks (SBUX), love the company! In fact, I love Starbucks so, so much that I want to scream from the highest rooftop in the normally rainy Seattle professing that unwavering love. Since I am unable to do that at the moment since its earnings season, these are the top reasons why I love, love me some Starbucks:
CEO and Founder Howard Schultz
A true winner and visionary in American business that has managed to spread these two traits throughout an expanding global coffeehouse empire. Walk into any (overseas included) Starbucks and I bet you a triple black espresso that an employee would know (and probably smile) a couple things about Howard Schultz. Go into a Wal-Mart (WMT)and ask who Doug McMillon (he is the new CEO...but also a longtime Wal-Mart executive...) is and see the answer that emerges. I love hard-working winners with passion and a positive attitude, it inspires me to win and I don't even work at Starbucks.
I love Starbucks stores, most notably the remodeled ones with the extra comfy seating and communal tables. Love those new brown, rustic communal tables, have got into great discussions with fellow millennials operating businesses that has led to tons of idea generation. Totally digging the free charging stations at Starbucks, too, which allows me to show new friends things I am working on by tapping on an Apple iPad, of course. Desktop? Ugh. Shout out to Starbucks' calming classical music. When you are as intense and game on as me, by golly, you need a place to find peace and to collect thoughts. That self-reflection nowadays is derived from the inside of a Starbucks as opposed to a creepy study room on a second floor college library (<---true story).
How can I not love the initiatives put forth by the Starbucks digital team? Almost every bricks and mortar retailer not named Starbucks is warning of vaporized sales and mass store closures amid a shift in how humans consume goods and services. Starbucks is leading in digital, and is well-equipped (increasingly so) to satisfy my visions of the world by 2020: real-time consumption of stuff with significantly less of an effort than in 2014. Wearables will be an integral component of that movement. BTW, did I mention I love Starbucks having 40% of its U.S. stores in drive-thru form? Love seeing that as it establishes a platform for the company to benefit from the rapid advance underway in in-car technology that integrates with wearables.
Absent the above discussion are all of the wonderful things that Starbucks does for charity and environmental sustainability around Mother Earth. Starbucks also rocks Twitter. Love Twitter. Love Starbucks! But, hey, at the end of the day the title on my very neat desk reads "CEO & Chief Equities Strategist." Therefore I have to check my love and personal attraction to Starbucks, any company I cover for that matter, at the door. As the self-proclaimed "world's strongest man" and a member of WWE Mark Henry states time and time again: "that's what I do."
If I enter a deep analysis on a company crushing on its CEO and the prettiness of its stores or machines, or the sweet sexiness of its piped-in classical music, that will create bias in my Excel doc modeling, how I interpret earnings call comments, and naturally comments shared in discussions with the company. Once that bias penetrates those avenues, the final recommendation on a stock is tainted. Who is hurt from that taint? Clients, who eagerly await the analysis and make big decisions using real money based on that analysis.
Here is a quick quote to share on Twitter to sum up this thought, I laid it out so you could just cut and paste:
"Check your biases at the door when analyzing a company, or risk portfolio mutilation." -@BrianSozzi
Analysts, well, analyze executive comments and trends. Personally, I analyze exec body language! If I entered a pre-earnings analysis on Starbucks (was a top pick for our clients in 2013) with biases of any form, then I guarantee I would have downplayed these important developments.
Slowing Americas Transactions Growth
Whether this surfaced because of the "seismic" shift in how people consumed goods (hurt Starbucks' December U.S. same-store sales) as noted by Howard Schultz, or from store operating issues born from an expanding menu (denied by the company), it's a development that occurred and is not factored into the valuation on a publicly traded Starbucks. Starbucks fetches its premium P/E multiple relative to other specialty retailers, the Dow, and S&P 500 due to it being a destination for individuals throughout the day, and that is supposed to stay intact regardless if goods are being bought on handheld devices from home. Basically, you are to order a pocketbook from Nordstrom (JWN) on their iPad app and then head to Starbucks, consume food and a frappe, and stay in the store for an hour to buy more on the Nordstrom iPad app.
Starbucks pointed out that in response to a December traffic slowdown in the U.S., it ramped promotions in the latter portion of the month. Starbucks, promoting. We aren't talking JC Penney (JCP) and Sears (SHLD) promoting to sell non-essential merchandise sourced from China, and Mr. Market is not accustomed to hearing the mighty Starbucks promoting for products that are thought to be daily essentials. Be advised that Starbucks' earnings per share estimates on the Street are already set above the top-end of the company's guidance, despite another worthy risk to consider.
Let this piece be a classic that you save forever. Separate love and obsession for a company from the factual financials and comments from a company and go onto be Howard Schultz more often than not, a winner.
--By Brian Sozzi in New York.