On the stock market there are lots of moving parts and cycles in the economy, however one thing is certain when former highflyer shares are down, at some point various hedge funds will take positions. The hedge funds will examine the company and if it has good solid bones to build from and underlying value that under the correct positions be unleashed, then that is even better. For other companies, if they are reasonably consistent with their earnings, then they have more freedom to execute their strategic plans. One of those stocks which was a highflyer is Starbucks.

In an article by Svea Herbst-Bayliss, Granth Vanaik and Waylon Cunningham of Reuters, the Board of Directors announced Brian Niccol, the CEO of Chipotle Mexican Grill Inc is taking on the job of CEO of Starbucks. The announcement sent the shares up 20%.

The backstory is in March of 2023, Laxman Narasimhan took over as CEO to engineer a reinvention, but the stock did not respond under his leadership as it went down 25%. As CEO Mr. Narasimhan was under pressure from Elliot Investment Management which owns a $2 billion stake to do things to increase the price of the stock. Another hedge fund with a large holding is Trian Fund Management which has many discussions with Disney.

Starbucks has faced increased competition and slower sales in its 2 biggest markets – China and the US. It was not helped with the working from home as many of its shops were located in or near office buildings.

Over at Chipotle, under Mr. Niccol’s leadership sales have grown every year and the stock has more than tripled. According to Thomas Hayes, Chair of Great Hill Capital, Mr. Niccol is a fixer and a doer and an executor. Mr. Niccol begins work at Starbucks on September 9.

Linking to dividend paying stocks, as long as the company is profitable, investors worry less who is the CEO, but once it loses money then the spotlight is on the executive team. Is it the correct one? how will they get back to profitability? If you own shares in a profitable company, all you need to worry is about the strategic plan and its execution, are they doing it well? There is always a worry, just some are easier to handle than others.

There are more questions than answers, till the next time – to raising questions.