Kellogg & Starbucks

Welcome back to Consumer Foodstuffs week. Today we are looking at Kellogg (K) and Starbucks (SBUX). First, Kellogg is a cereal and convenient food distributor that was established in 1922. The current CEO is John Bryant. As with our other companies, we simulated investments by buying ten shares in the company, priced at $51.49. Since then, we have turned this into a minute profit, as the market closed today at $51.58. Historically, the company has not exactly been stable - it has great spikes, but also great tumbles. Shares reach highs in 1997, 2008, and 2010, but have always fallen right back down, best seen in 2000 and 2008. Looking at the company in more recent terms, stocks are fluctuating between neutral and buy ratings. Just a month ago, on September 4th, Kellogg reaffirmed its neutral rating and dropped about a quarter point that day, and another half point by the next week. The week of September 27th, the cereal distributor announced the release of new low-calorie products, which prompted growth over the next weeks (no other major events occurred) and by last week reached almost $52 a share. We believe the company is a good short-term investment, but do not expect it to turn a tremendous profit.
Our second company is the coffee retail chain, Starbucks. This favorite of many was established in 1985 and is now headed by Chief Exec. Howard Schultz. We 'bought' ten shares about two weeks ago, priced at $50.93, and made quite a loss since then. The market closed at $47.35 today, marking nearly $36 in losses since buying the stocks. Since incorporation, the company has seen tremendous growth, followed by 2008, and then a staggering recuperation and all-time high in early 2012. The company now is struggling to maintain those statistics - the market for Starbucks is very unstable. On September 4th, the company closed a deal with LivingSocial, to sell $10 gift cards at $5, an attractive proposal that lifted share price by a dollar. At the end of the following week, the company announced its reaffirmation of the 'buy' status and that it expected growth to $57, from the stagnant $52. To say the least, the stocks fell far from expectations, dropping nearly $3. The current instability with the company, and the desperate actions taken to meet expectations, along with our own losses at a two month low only adds to our advice against investing in Starbucks.