Wednesday, November 18, 2009

Why the Fools are selling their shares in Starbucks (SBUX)

I started investing in the stock market this summer. So far, it's a fascinating adventure. In the past, the market bored me but I am willing to admit now that it was not so much boredom as prejudice and spiritual snobbery. I viewed it as "unworthy" a subject for study, for an aspiring saint.

That all changed when I took a Called and Gifted workshop this summer in Chicago, from the Catherine of Siena Institute. There I learned to get off my high horse and disabuse myself of the idea that money itself is the root of all evil. NO, NO, NO - it's the LOVE OF MONEY that is the root of all evil, or so the saying goes. I don't even know where the saying comes from.

Just goes to show that you CAN teach an old dog new tricks.

It turns out that I score very high in the charism of Giving, one of whose manifestations is the ability to create wealth in order to give it generously where it is needed. I've always enjoyed being generous, and I've always enjoyed hustling for money, but I never put the two together before that workshop as two sides of the same charismatic coin.

So I'm having a blast in the market.

Here is a nice analysis from the Motley Fool folks on why they are selling their Starbucks shares and advising others to do the same.

I never bought Starbucks, but I AM trying to learn how to really analyze companies and determine valuations, so I can pick stocks on my own and not other people's advice. So this is for me to print off and read, when I have time to look at Starbucks' financials. Motley Fool was bullish on Starbucks for a long time. They say that knowing when to sell is even more important than when to buy. Hence -- this is for my education!

Motley Fool Million Dollar Portfolio


Felix said...

Hi Rae! It's Felix from The Catholic Investor...nice blog you have here and thanks for putting my blog on yours. As for evaluating stocks, you've gotta get yourself a copy of Phil Town's "Rule #1". You won't regret it!

Rae said...

Hi Felix,

Thanks for the comment! I was so happy to find your blog. There's not a lot out there about Catholics investing. I was trying to shadow Aquinas Fund and Ave Maria Fund for awhile, using their portfolios as a stepping off point. But I;m not convinced they know how to invest so much as are concerned about what not to invest in.

Thanks for the recommendation on the Rule #1 book. I looked it up and will probably get it. One thing, though, with this and other methods that track past performance. What does one do about the past year and the quarters that tanked badly? You can't just eliminate them, but they do mess up the track record for a company;s performance. Is there some kind of an equation for judging how, relative to the rest of the recession during the tanking quarters, one's own targeted companies are doing?

Felix said...

Rae, stock investing is a very subjective activity. Many people have come up with some very smart ways of quantifying a company's performance, but in the end, it takes some skill to discern it's future performance. That's why not everyone is Warren Buffet! :)

One thing that I do look for is continued profits. Bad companies will lose a lot of money during a recession. Good companies will still make money, albeit less, during a recession. Companies such as Google and Apple are excellent examples. You need to look at a longer history (5-10 years) as opposed to the last 1 or 2 to get a good idea of how consistent a company is.