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Starbucks: An Investment Lesson in Buying Quality & Managing Emotion

We are constantly reminded that life as an investor can be an emotional roller coaster. Watching your investment and retirement accounts fluctuate in value can be exhausting. No one said investing is easy, not even for the most successful investors of past or present. The good feels great and the bad feels terrible but managing your emotions is a key component for success.

Understanding that stock market and a company's stock price  fluctuate daily, they go up and down ("volatility") but if you have patience and own a quality and growing business, you will generally be rewarded over time. 

Disclaimer:  This post is informational only and is not meant to be investment advice on any specific stock. Again, educational purposes only.

The Starbucks Example


One example of investing in a high quality, global company that has done a great job branding is... Starbucks.  A company that most people around the world recognize and may even enjoy their products (and experience).  The company has gone through it's share of company reorganizations, change in C-suite leadership, corporate re-branding and has been at the forefront of many social issues too.  It's safe to say that they have managed through many ups and downs and have come out successful.  

Starbucks became a publically traded company ("stock") in June 1992.  Since their initial public offering ("IPO"), they have managed through  three economic recessions (see the grey columns in the charts below). Not recession specific, but their stock price has seen its value fluctuate tremendously ("volatility") on a short term basis. The statistics below show the number of times Starbucks' stock price has seen it's share price value  decline by some rather extreme measures.

> 25% decline - 19 times
> 35% decline - 5 times
> 45% decline - 3 times
> 80% decline - 1 time

The chart below illustrates these price declines by percentage from its high price since it's IPO. 


Long Term Investors Rewarded for Being Patient


Despite the price declines illustrated above, Starbucks has seen it's stock appreciate by over 22,920% since its IPO. This is a great example of not letting price fluctuations over a short time period scare you out of owning a great company for the long term. Starbucks, nor other publically traded companies manage their businesses for short term price moves.  If you listen to their earnings calls or read their annual reports, their goal is to run a healthy business and create shareholder value over the long term. The same goes for the "stock market" which is made up of many of these companies. 


Focus on What Matters


We continue to highlight one of our favorite investor education pictures below.  Investing over a short time period is uncertain. Being a trader and attempting to perfectly time your buy or sells is extremely tough.  Watching the value of your account or a stock price over a short term period will test your patience and often trigger a potentially emotional decision that could be detrimental to long term returns.  This is where having a discussion with your Sandbox advisor is important to keep you aligned with your financial plan.

This example may be elementary for some but certainly a great reminder for more experienced investors too.  If you have any questions, please do not hesitate to reach out to your Sandbox Financial Team

For a free consultation on your personal investments or financial plan, Contact Sandbox Today