5. Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 76
Starbucks Corporation (NASDAQ:SBUX) is a Washington-based multinational chain of coffeehouses that specializes in a wide range of coffee beverages. The economy, and especially consumer spending, has shown resilience over the past year despite ongoing uncertainty. However, Starbucks has not experienced similar success. The highly competitive and fragmented nature of the retail coffee market poses challenges for the company. In the US, the top five coffee chains collectively hold less than half the market, leaving customers with plenty of alternatives to large chains. With no switching costs, customers can easily choose other options, leaving Starbucks little margin for error—an issue that seems to be affecting its performance. In the past year, the stock has shown a modest return of just 0.18%.
Starbucks Corporation (NASDAQ:SBUX) showed mixed earnings in fiscal Q4 2024. The company posted revenue of $9.07 billion, which fell by 3.2% from the same period last year. That said, the cash position remained stable, generating $6 billion in operating cash flow. During the quarter, the company added 722 net new stores, increasing its total locations to 40,199. Of these, 52% are company-operated, while 48% operate under licensing agreements.
ClearBridge Investments appreciated Starbucks Corporation (NASDAQ:SBUX) on its strong business model in its Q3 2024 investor letter. Here is what the firm said:
“Similarly, we took advantage of a business reset at Starbucks Corporation (NASDAQ:SBUX) in the third quarter to initiate a position in the global coffee retailer. A confluence of factors, including degraded store-level operations and long consumer wait times, consumer fatigue with high prices and weakening engagement among occasional Starbucks customers has led to declining U.S. same-store sales growth. While the path ahead will likely require reinvestment back into the business, there are many merits to Starbucks’ business including its strong brand name and category leading market position. In response to recent challenges, Starbucks has appointed change-agent CEO Brian Niccol, who we know from the Strategy’s ownership of Chipotle Mexican Grill during its turnaround. Niccol has a successful track record of investing in product innovation and fixing execution issues, which we believe are the primary challenges facing Starbucks today. Starbucks represents the kind of successful playbook we have executed on historically – focusing on high-quality businesses and brands while being disciplined around the entry point into investments with attractive risk-reward opportunities.”
Starbucks Corporation (NASDAQ:SBUX), one of the best dividend stocks, has been growing its dividends consistently for the past 14 years. The company’s quarterly dividend currently comes in at $0.61 per share for a dividend yield of 2.48%, as of December 10.
As of the close of Q3 2024, 76 hedge funds held stakes in Starbucks Corporation (NASDAQ:SBUX), growing from 70 in the previous quarter. These stakes have a consolidated value of more than $3.25 billion.
