2. Starbucks Corporation (NASDAQ: SBUX)
Number of Hedge Fund Holders: 61
Starbucks Corporation (NASDAQ: SBUX) is an American coffeehouse chain and roastery with headquarters in Seattle. The company was founded in 1971 as a retailer and roaster of ground coffee, tea, and spices. Over the years, the coffeehouse chain has expanded in over 80 countries with more than 32,000 stores.
In Q2 FY21, Starbucks Corporation (NASDAQ: SBUX) generated over $6.7 billion in revenue, up 11% from the prior-year quarter. The EPS was recorded at $0.62, beating the market consensus by $0.09. Global comparable sales grew by 15%. The U.S. remained the biggest market in the second quarter, accounting for $4.6 billion of the gross revenue, and saw a 9% growth in comparable sales. The board of the company also declared a quarterly dividend of $0.45 per share. In April, an analyst from BTIG raised the price target on SBUX stock to $130 and rated it as a ‘Buy’ due to improved sales in the U.S.
As of Q1 2021, 61 hedge funds tracked by Insider Monkey have positions in Starbucks Corporation (NASDAQ: SBUX), worth $4.4 billion. With 10.7 million shares worth $1.1 billion, Fundsmith LLP is the leading shareholder of the company.
Wedgewood Partners, an investment management firm, released its Q1 2021 investor letter and mentioned Starbucks Corporation (NASDAQ: SBUX) and other stocks in it. Here is what the firm has to say:
“As we have observed Starbucks through the unpredictable events of the past year, we believe all the things we liked about the Company’s competitive position before the pandemic have been turbocharged by the pandemic. We always have maintained the Company had no serious competition, anyway, and that in both large growth markets (U.S. and China), there was enormous fragmentation of share that would allow the Company to continue to expand through market expansion (especially in China) and through share gain versus small competitors. In fact, when we last discussed Starbucks, there was a lot of noise about competition in China from a newly established domestic competitor, Luckin Coffee, and that situation quickly dissolved into farce. In any case, had Luckin been a legitimate business, we had maintained that China was a massive market – and one in which coffee consumption was massively underpenetrated in comparison to other markets. We believed too that there was plenty of room for multiple large competitors to exploit.
The pandemic disaster over the past year truly highlights the Company’s financial strength in comparison to its small competitors, most of which struggled to survive, and many of which didn’t make it. While there is no perfect data, we have seen estimates from industry groups and restaurant distributors that as many as 15-20% of small, independent restaurants across the broad food and beverage industry may have closed permanently as a result of the pandemic, sadly. Starbucks not only survived due to its superior financial position; they also used its financial resources to invest in a variety of expanded or new capabilities, including the addition of drive-through capacity, new “walk-through” pick-up locations in urban areas, increased investment in technology to drive speed within the stores and drive-through lanes, and expansion of its loyalty program. These could have been viewed, prior to the pandemic, as a fairly big advantage in terms of convenience alone versus the Company’s small primary competitors. In the age of the pandemic, though, one might consider something like a drive-through an absolute necessity, as customers choose not to expose themselves to the interior of restaurants or to other people…” (Click here to view the full text)
