One of the most frustrating aspects of investing is adhering to financial principles that ultimately lead to losses. This sentiment resonates deeply regarding the longstanding belief that abandoning value stocks is a cardinal sin. Since the late 1980s, I have staunchly believed that if a company’s brand is valuable, it must be retained in one’s portfolio. This philosophy has recently backfired, particularly for my Charitable Trust portfolio, despite its prolonged success.
Take Wynn Resorts, a former strong performer under Steve Wynn, but now a disaster due to its exposure to China, which severely affected its valuation. Similarly, Estee Lauder has faced significant declines. Its CEO, Fabrizio Freda, once navigated global markets skillfully but misjudged the impact of China’s economic downturn, turning the stock into an overpriced, faltering growth entity.
On the other hand, Starbucks presents a contrasting case. The recent ousting of CEO Laxman Narasimhan, replaced by Chipotle’s Brian Niccol, offers new hope. Niccol’s proven track record in resolving operational woes and boosting efficiency, as seen with Panera Bread under Ron Shaich’s leadership, instils confidence. Activist investors, backed by the faith in Niccol’s capabilities, drove Starbucks stock up 24.5%.
This situation highlights the critical nature of decisive leadership and strategic overhaul. While a turnaround seems plausible for Starbucks under Niccol, the complexities surrounding Estee Lauder and Wynn Resorts remain challenging. The ability to breathe new life into struggling stocks lies heavily on innovative leadership and keen strategic shifts. For now, Starbucks appears to be on the right path, but the future for Estee Lauder and Wynn Resorts remains uncertain.
Original Story https://www.cnbc.com/2024/08/18/jim-cramer-starbucks-ceo-switch-brian-niccol.html
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