Pyramid. Interesting word.Thats exactly what Starbucks is. A financing pyramid. Higherstock=more dilution(stock issued)=more cash=more store openings=higher price= more dilution=more cash=more stores.........you get the picture. Problem is eventually there won't be any more store openings and when you look at the value of the company based on a per store price you are paying 10 times what each one is worth seperatly.
Throw in a little cost cutting from competitors, maybe a small bear market or correction in the DOW in general, a dash of fund profit taking and whala!! your goose is cooked. I would be very careful buying at these lofty prices. A better way is to trade from the short side(on spikes like today), take half profit quickly, and cutting your position if SBUX makes a new high, and then reestablish shorts higher.This way, if the bubble keeps growing you cut out early with minimal or no loss, and when it bursts you will be there for the inevitable long spiral down to???? 10-12-14 ? Something like that I'm sure.
By the way, volume was huge today(4.7 million shares) on the third consecutive big up day reaching to yet again all time highs. This huge volume,in my opinion, marked the top for at least awhile, if not forever. All the good news is out, and these spikes up on big volume are usually called the "distribution phase" where stock goes from the pros(taking profit) to the amateurs rushing to buy the good news(the bag holders). Don't get caught holding the bag. |
