However, lately it’s been a bear for my Charitable Trust, the portfolio we use for the Investing Club, and I would apologize except it’s worked for so long I don’t know what to apologize for. Consider the case of now-former Club holding Wynn Resorts. The casino chain had been a strong-performing stock for years when Steve Wynn ran it. But it has become an unmitigated disaster because any company with China exposure has been horrendous, regardless of how good it is. We didn’t give up on Danaher despite the life science firm’s Chinese business as we thought it was too valuable. The same went for GE Healthcare, although there were regrets over not recognizing its interest-rate sensitivity and not investing in Intuitive Surgical instead.
Wynn Resorts suffered a significant drop in its valuation, leading to the decision to sell it to raise cash to buy higher-quality stocks. Meanwhile, Club holding Estee Lauder has also been a disappointment due to the collapse of its Chinese business, despite being a stock that was held for years with the belief in its value. With the uncertainty surrounding the company’s future, decisions to trim holdings were made in hopes of a leadership change. The departure of Starbucks’ CEO Laxman Narasimhan and the appointment of Brian Niccol, known for his success at Chipotle, have resulted in optimism among investors. The change in leadership has sparked a 24.5% surge in Starbucks stock as Niccol is seen as a fixer and has the necessary skills to turn the company around.
The market had lost faith in Narasimhan due to his unsuccessful strategies and consultant-like approach, leading to the conclusion that a change was necessary. Niccol’s background in food, service, and order throughput make him a suitable choice to lead Starbucks in a new direction. The success of Panera Bread’s transformation under Ron Shaich’s leadership demonstrates the potential for Niccol to implement changes that could significantly impact Starbucks’ performance. Despite challenges faced by Narasimhan, such as a boycott of Starbucks by pro-Palestinian supporters, the company’s declining sales and other issues contributed to the decision to seek new leadership.
Niccol’s appointment has been met with enthusiasm as investors see an opportunity for positive change and revitalization of Starbucks. His expertise in managing restaurant operations and improving efficiency give hope that he can address the company’s challenges effectively. The drastic improvement in Starbucks’ stock price following the CEO announcement reflects confidence in Niccol’s ability to lead the company towards success. While Wynn Resorts and Estee Lauder have faced setbacks, Starbucks’ situation presents a unique opportunity for a turnaround with Niccol at the helm, offering a chance for investors to regain confidence in the company’s potential for growth and profitability.
Overall, the recent changes in leadership at Starbucks have provided renewed hope for the company’s future and a positive outlook for investors. While challenges exist, Niccol’s track record and skill set position him as a strong candidate to drive Starbucks towards success. The market’s response to his appointment reflects optimism and confidence in his ability to implement effective strategies and lead the company through a period of transformation. As an investor in Starbucks and other companies, decisions are based on the belief in value and the potential for growth, with the goal of achieving positive returns over time.
