Seven Core Growth Stocks for Your Portfolio – Starbucks Corporation (SBUX)

McDonald’s Corporation (NYSE:MCD) has made steady inroads into the coffee market. The company threatens to undercut competitors and has already been successful taking share. Between 2004 and today, McDonald’s grew its share of U.S. retail coffee sales from 2% to 7%. Expect those gains to continue as McDonald’s completes its McCafe roll-out.

By 2011, coffee accounted for $2.1 billion of McDonald’s Corporation (NYSE:MCD)’s $34.2 billion U.S. sales. Don’t dismiss a juggernaut with a $100 billion market capitalization and the resources that brings.

Dunkin Brands Group Inc (NASDAQ:DNKN) is also expanding westward, threatening to encroach on Starbucks’ turf.

Dunkin Brands Group Inc (NASDAQ:DNKN)’s 7,306 U.S. stores are concentrated in the northeast leaving the company lots of room to expand in the Midwest and on to California. Management plans to double its number of U.S. locations by 2033. This year Dunkin’ will open 300-360 stores in the U.S. targeting a long-term annual unit growth rate of 4.5% – 5.0%.

Second: execution. Expansion is difficult. Expanding into emerging markets is especially challenging and already we’re seeing problems emerge. In May, Starbucks faced a “toilet water” scandal in China. Of course, problems like this threaten the company’s brand and derail growth plans.

When you’re paying over 30 times earnings for the stock, execution needs to be flawless.

Foolish bottom line

Starbucks remains the undisputed leader of coffee, and the company’s prospects look quite exciting. Of course there’s always risk when investing in a aggressive growth stock. But in the case of Starbucks, those risks are more than compensated by the company’s potential.

The article 7 Core Growth Stocks for Your Portfolio – Starbucks originally appeared on Fool.com and is written by Robert Baillieul.

Robert Baillieul has no position in any stocks mentioned. The Motley Fool recommends McDonald’s and Starbucks. The Motley Fool owns shares of McDonald’s and Starbucks. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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