Scrutiny; all stocks face it at one point or another. In a roaring stock market where growth has been plentiful, we start to expect all great growth stocks to exhibit the same success. We grow impatient of stocks that might be lagging the rest of the market, and sometimes mistakenly sell them to try to find better performing options. Time and time again though, just as we sell we usually see that company’s stock go on a great run. Investors that are growing impatient of Starbucks Corp. (NASDAQ:SBUX), need to exhibit patience.
Now CEO Howard Schultz was on a business trip to Milan, Italy for Starbucks when he was working as the director of marketing. While in Italy, he noticed that coffee bars existed on practically every street. These coffee shops served not only excellent espresso, but as public squares or meeting places for the community. Schultz brought this vision to Starbucks, incorporated it into his restaurants, and over time created a moat for Starbucks. A moat stock is when a company has a competitive advantage that acts as a barrier to competitors.
To the consumers, Starbucks is much more than just a coffee shop. Starbucks adopted the Italian coffee bar model and is now that “third place” where professionals, students, and every day people go to hang out and spend a few bucks. I know firsthand that Starbucks gives you a clean, enjoyable environment, where an individual can relax or get work done, while being away from home or work. It is this “third place” environment that Starbucks provides so well, that gives them a huge competitive moat. Sure some might say that Dunkin (NASDAQ:DNKN) has a better coffee, or that they prefer a small local shop to get coffee. However, in locations all across America, and rapidly expanding into 61 other countries, Starbucks will always provide you a great “third place” environment time and time again.