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We went on record in Fortune that investors should short Starbucks (SBUX) on 11/6/2006 when the stock was close to $38 per share. The stock did not look attrac­tive to us until two years later when it was under $8, and that for only about three days (11/18 – 11/20/08). Ever since we have had a Neu­tral or Dan­ger­ous Rat­ing on the stock.

Don’t get me wrong, Star­bucks has per­formed a rather remark­able turn­around in prof­its as it switched from an aggres­sive growth strat­egy to a retrench­ment strat­egy as we sug­gested it should do on CNBC on 11/16/2006. And I believe the change in logo is a smart move, as it empha­sizes Star­bucks' intel­li­gent shift from focus­ing on sell­ing a com­mod­ity (e.g. cof­fee and the like) to sell­ing a brand, which offers higher margins.

But that shift has already largely take place. There is not much more room to grow before larger, more established play­ers in the con­sumer pack­aged-food space take notice. And those com­pa­nies with comparable brand power and supe­rior dis­tri­b­u­tion put a cap on Star­bucks' growth opportunities.

The bot­tom ­line: Star­bucks is a good com­pany but not a good stock. There is sim­ply not that much profit oppor­tu­nity in a cof­fee shop, no mat­ter how glam­orous it makes the coffee-drinking experience.

The val­u­a­tion is already rich and expec­ta­tions are high. In other words, the mar­ket and investors have already set a very high bar for future per­for­mance. Specif­i­cally, the cur­rent stock price ($32.35) implies the com­pany will grow prof­its at a 10% com­pounded annual growth rate ((CAGR)) for 15 years. In addi­tion, the com­pany is not as prof­itable as peo­ple think, as it car­ries about $3.6bn in off-bal­ance sheet debt — equal to about 80% of the company’s reported net assets.

All the details are in our Com­pany Val­u­a­tion Report on SBUX, avail­able for free here (PDF).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.