Is Starbucks A Smart Long-Term Buy?

Fundsmith LLP, an investment management firm, published its ‘Fundsmith Equity Fund’ year-end 2020 investor letter – a copy of which can be downloaded here. A return of 18.3% was recorded by the fund in the fourth quarter of 2020, outperforming its MSCI World benchmark that delivered a 12.3% return. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.op 5 holdings to have a peek at their top bets for 2021.

Fundsmith LLP, in their Q4 2020 investor letter, mentioned Starbucks Corporation (NASDAQ: SBUX) and emphasized their views on the company. Starbucks Corporation is a Washington-based coffeehouse company that currently has a $127.6 billion market capitalization. Since the beginning of the year, SBUX delivered a 1.32% return, extending its 12-month gains to 74.54%. As of March 10, 2021, the stock closed at $107.78 per share.

Here is what Fundsmith LLP has to say about Starbucks Corporation in their Q4 2020 investor letter:

“Starbucks  is probably familiar to you as the world’s leading coffee shop brand, a company with high returns on capital and good growth rates — two characteristics which we seek. Whilst it is easy to see the challenge to the lockdowns for Starbucks’s urban outlets which partly rely on seating and coffee collected on the way to the office, this is far from their only format. The sometimes spectacular queues and resulting traffic jams at Starbucks drive-through outlets both illustrate another format and testify to the continued loyalty to the brand as does the rise in loyalty club members in 2020. During this period Starbucks’s main competitor in its second largest market — Luckin Coffee in China — was exposed as a fraud in yet another illustration of the rule that it is only when the tide goes out that you find out who has been swimming naked.”

Our calculations show that Starbucks Corporation (NASDAQ: SBUX) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Starbucks Corporation was in 67 hedge fund portfolios, compared to 66 funds in the third quarter. SBUX delivered a 2.73% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.