🤒 Starbucks ain’t feeling so hot

PLUS: Warren Buffett's failed Paramount investment; Billionaire real estate mogul turns down $10B

Today’s market performance 🏆️ 

S&P 500: +0.13% 📈
Nasdaq: -0.01% 📉 
Dow 30: +0.08% 📈
Russell 2000: +0.19% 📈

🤒 Starbucks ain’t feeling so hot

📸 Fast Company

Despite its delicious frappes and strong standing in the S&P 500, the world’s largest coffeehouse chain seems to be losing its touch.

During the company’s Q2 earnings call last week, Starbucks' struggles were put on full display for the world to see.

That’s the Achilles heel of being a public company: everybody gets to see your dirty laundry.

Here are some numbers the company reported:

  • Revenue: $8.56 billion (vs. $9.13 billion expected)  

  • Earnings: $0.68 per share (vs. $0.80 per share expected)  

Foot Traffic:

  • North America: -7% (vs. +6% in Q2 2023) 📉 

  • International: -3% (vs. +7% in Q2 2023) 📉

Same-Store Sales:

  • US: -3% (vs. +2.31% expected)  

  • China: -11% (vs. -1.62% expected)  

Starbucks CEO Laxman Narasimhan believes that most of the company's financial woes stem from inflation and customers' decreased spending.

Sounds a little familiar, doesn't it? Regardless of how true these unoriginal claims may be, their inability to “crack the code” in China is likely the biggest long-term issue.

Despite investing billions in the country for branding and distribution and over 7,000 store locations—with 9,000 expected by 2025—their sales, as you can see above, are still way down, and so is foot traffic.

So, it seems that if Starbucks wants to maintain its title as the majesty of coffee, it needs to brush up on its current foreign policy.

📉 Starbucks ($SBUX) is down -16.85% in the past month.

 Warren Buffett's failed investment in Paramount

📸 Variety

Back in Q1 of 2022, Berkshire Hathaway disclosed a whopping $2.6 billion stake in Paramount. 

Later that year, Buffett added even more shares and eventually became the largest holder of the company's non-voting shares.

💬 Shari Redstone and the Redstone family’s “National Amusements” control most of Paramount’s voting shares.

The move was shocking for several reasons, specifically because Buffett preaches that an investor should always stick to his “circle of competence” when investing in companies.

Paramount was obviously outside his wheelhouse from the start, and he got burned badly because of it.

From the company's failure to secure a buyer to turmoil at the executive level, including the CEO leaving and reluctant board members, Paramount is in deep crap. 

Accordingly, just a couple of years after his initial investment, Buffett dumped Berkshire Hathaway’s entire Paramount stake at a loss.

During the legendary 44th annual Berkshire Hathaway shareholder meeting, Buffett said:

“I was 100% responsible for the Paramount decision.”

“It was 100% my decision, and we’ve sold it all, and we lost quite a bit of money.”

Why sell at a loss?

Well, while we can't say for certain what the "Oracle of Omaha" is thinking, considering he’s currently sitting on a record $189B in cash, we're guessing he's preparing for either an economic collapse or a world war.

Or maybe he just wants a ton of cash on hand in case a company goes on sale for very cheap; we guess that is a little more likely. 

Either way, we’ll just have to wait and see. 

📉 Paramount ($PARA) declined 44% in 2022, 12% in 2023, and 10% year-to-date because of many issues.

🏈 Billionaire real estate mogul Stephen Ross turns down $10B

📸 Sporting News

Last week, while I was debating whether or not to splurge on sushi for lunch, billionaire real estate mogul Stephen Ross calmly turned down $10B.

Talk about a reality check. And no, that’s not a typo…. we mean $10 billion, with a big fat "B."

What could someone possibly want for that much? His controlling stakes are in the Miami Dolphins, Miami Grand Prix, and Hard Rock Stadium.

Why’d he reject the deal, too good to be true?

  • Not necessarily; the offer was definitely generous, but Ross says he prefers to keep the assets in the family, which makes perfect sense.

  • NFL teams have become super hot commodities with an extremely high ROI.

  • The average team was worth $5 billion in 2023, a staggering 24% higher than the average team just a year prior.

Talk about inflationary numbers.

And with the Dolphins worth around $5.7B today, it's no surprise that Ross wants to keep the asset for as long as possible.

But still, regardless of whether it makes sense in the future or not, turning down $10B, the same figure as your proposed net worth, that takes massive guts.

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