All Fired Up: Starbucks
Tuesday’s Mad Money was all about new beginnings. In the last 24 hours, four corporate boards – Starbucks, Bear Stearns, Sallie Mae and Krispy Kreme – have sacked and replaced three CEOs and one chairman. Cramer called it the “perfect storm of firings” and set out to explain how each move can make Homegamers money.
He started with Starbucks . It was first reported Monday that Jim Donald had been fired and replaced with Howard Schultz, the previous CEO who made Starbucks into a titan. Cramer had never been a fan of Donald – but he believes in Schultz. That’s why the coffee giant is, once again, a buy.
Cramer had long loathed SBUX because he felt the coffee giant had saturated the market. The growth seemed over, he thought. Too many stores, not enough profits and customer service that seemed overwhelmed. Not to mention a lack of new products, increased competition from McDonald’s and a need for overseas exposure. How could the Starbucks ship ever be righted?
Here’s the rub. Cramer has no doubt that the next quarter will be downright awful. Investors will lose faith in Schultz – they will think his task is insurmountable – and that will be the real buying opportunity, Cramer said.
The best way to play the new SBUX, according to Cramer, is to put on a quarter of a position now, another quarter in a week, and then the other half after the report at the end of the month.
Schultz stuck his neck out in promising a turnaround. You don’t do that unless you can deliver.
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