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Fixing Starbucks and Praising Best Buy


Don't fight the best in breed of a hot sector, whatever you think of the consumer as a whole.


Hello from New York where President Bush speaking semi-extemporaneously about the economy hasn't exactly lessened my desire to call it a year and head out the door until January 2. No political statements here (at least from me). I voted for the guy twice and, given the alternatives at the time, I'd do it again. I'm just saying, if you're looking for a solution to year-end apathy, a presidential press conference isn't it. Here's what I'm watching to take my mind off the pain:

  • Mrs. Jeffmacke and I did some Christmas shopping over the weekend. I was impressed with the traffic and business flow at: Best Buy (BBY), who is in the sweet-spot of a bitter sweet Holiday season; LVMH's Sephora, who sold Mrs. JM a whole bunch of make-up she really doesn't need and Saks (SKS).

  • Among the misses was Starbucks (SBUX): I've been on the "Long McDonald's (MCD), sell Stabucks" trade for most of this year, if not longer. With SBUX off over 40% YTD and the analysts starting to pile on the coffee kingpin, I'd really like to get bullish SBUX here, if only because it seems like a sort of cocky thing to do. But after visiting a filth-hole SBUX and waiting 20 minutes while they lost our order I can't help but think things are still going to worse before they improve. What would I do to fix Starbucks? I'd rip the menu in half and I'd dump the music. Don't be fooled by crowded stores, Minyans. "Lines out the door" is only a good thing if the customers are being served quickly. Otherwise it's just the DMV.

  • Two of the consumer names I'd love to own are private. Toys 'R' Us and Dunkin Donuts. The former has done a complete 180 from its days of plummeting towards zero as the "K-mart of Toys" in the late 90's. The latter is everything SBUX and Krispy Kreme (KKD) should be.

  • As is, I the only long trade I'd consider on the consumer right now is a Best Buy options probe into earnings tomorrow. I'm not trying it and I think my "I've sold incremental longs and am done for the year" stance is well documented. I'm just saying, as I did on Friday's Fast Money, a lot of people are shooting against Best Buy even as just about everyone who sells products at BBY (Corning (GLW), HP (HPQ), the video game guys) is saying business is great. Don't fight the best in breed of a hot sector, whatever you think of the consumer as a whole.


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No positions in stocks mentioned.

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