While exact motives remain unclear, the $8.3 billion hedge fund Pershing Square has recently established a $900 million long position in Starbucks (SBUX), the fund’s helmsman Bill Ackman announced today. The stock gained about 3 percent following the news.
Ackman is famous for his outspokenness and activist investments. His $1 billion short on Herbalife (HLF), which he believed was a pyramid scheme masquerading as a direct sales company, was the subject of a feature-length documentary called "Betting On Zero."
Not all of his investments are made for activist reasons, and the recent stock acquisition is generally seen as being motivated by profit potential. Not long ago, the fund was hit with a series of damaging blows, which included significant losses in Valeant Pharmaceuticals (VRX) and the overly zealous bet on Herbalife, losing half of its former value by early 2018. The losing streak cost the hedge fund a swath of investors and 1/4 of its staff. Ackman assured his clients that he would do all that he could to rebuild the fund, not by simply recruiting new investors, as many hedge funds do, but through smart investing.
Ackman had foreshadowed today's announcement weeks ago, when he disclosed that his fund was repositioning about 10% of their capital. This year he has since also revealed new stakes in Nike (NKE), United Technologies (UTX), and Lowes (LOW).
The fund holds large positions in other food service companies, including Chipotle (CMG), Restaurant Brands International (QSR), and Mondelez International (MDLZ). Other significant holdings include Target (TGT), and Automatic Data Processing (ADP). 2018 has been a good year for Pershing Square thus far, both for the private hedge fund and its publicly traded counterpart.
The Aroon Indicator for SBUX entered a downward trend on June 01, 2023. Tickeron's A.I.dvisor identified a pattern where the AroonDown red line was above 70 while the AroonUp green line was below 30 for three straight days. This could indicate a strong downward move is ahead for the stock. Traders may want to consider selling the stock or buying put options. A.I.dvisor looked at 136 similar instances where the Aroon Indicator formed such a pattern. In of the 136 cases the stock moved lower. This puts the odds of a downward move at .
The Momentum Indicator moved below the 0 level on May 19, 2023. You may want to consider selling the stock, shorting the stock, or exploring put options on SBUX as a result. In of 89 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for SBUX turned negative on May 03, 2023. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 53 similar instances when the indicator turned negative. In of the 53 cases the stock turned lower in the days that followed. This puts the odds of success at .
SBUX moved below its 50-day moving average on May 22, 2023 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for SBUX crossed bearishly below the 50-day moving average on May 24, 2023. This indicates that the trend has shifted lower and could be considered a sell signal. In of 16 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where SBUX declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The RSI Indicator shows that the ticker has stayed in the oversold zone for 6 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an Uptrend is expected.
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 6 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where SBUX advanced for three days, in of 337 cases, the price rose further within the following month. The odds of a continued upward trend are .
SBUX may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is seriously undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (0.000) is normal, around the industry mean (8.612). P/E Ratio (31.646) is within average values for comparable stocks, (162.857). Projected Growth (PEG Ratio) (1.347) is also within normal values, averaging (2.085). Dividend Yield (0.021) settles around the average of (0.032) among similar stocks. P/S Ratio (3.306) is also within normal values, averaging (50.693).
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 84, placing this stock better than average.
The Tickeron Seasonality Score of (best 1 - 100 worst) indicates that the company is fair valued in the industry. The Tickeron Seasonality score describes the variance of predictable price changes around the same period every calendar year. These changes can be tied to a specific month, quarter, holiday or vacation period, as well as a meteorological or growing season.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating fairly steady price growth. SBUX’s price grows at a lower rate over the last 12 months as compared to S&P 500 index constituents.
The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows
a producer of coffee and tea
A.I.dvisor indicates that over the last year, SBUX has been closely correlated with YUM. These tickers have moved in lockstep 68% of the time. This A.I.-generated data suggests there is a high statistical probability that if SBUX jumps, then YUM could also see price increases.
|YUM - SBUX|
|DRI - SBUX|
|SHAK - SBUX|
|EAT - SBUX|
|TXRH - SBUX|