THE COFFEE MAY BE EXPENSIVE..
but the stock is looking cheap.

I'm talking about Starbucks (SBUX). It's been on my watch list for a while now and I like the current valuation. I had a buy around price of $22-$25 and it's currently trading around $26.

While I believe the stock is a buy at around $20-$25, I am factoring in the following:
-- Domestic growth has slowed
-- In some local regions where growth can be had, it's facing stiffer competition
-- A slowing economy makes Starbucks a luxury for many
-- Deviation from core business and the accompanying risks.

All the same, it's a well run company with huge growth potentials, especially in foreign markets. I believe management runs the company conservatively with the greater good of employees in mind. The company continue to maintain a sales growth north of 20% and have enough leverage to implement a price increase.

The current P.E of 31 while higher than the industry average is less than the company's average P.E which has been in the 40s. ROI, ROE remains high and debt is no issue.

I believe at a price of around $25, it's a great company to hold for the next few years.