In November, I told you about a company I suggested as The Market‘s Next Big Turnaround Story. And if ever a company had room to turn around, then it was this Silicon Valley stalwart.

Its stock peaked at $108 a share on the last day of 1999. Then came the “Dot-com” bust. Within two years the shares had fallen to a low of $8. Most of the ensuing decade has been spent playing catch-up to a new wave of competitors.

The brand was — and still is — iconic. But in recent years, shares have floundered. And since 2008 the company has chewed up and spit out four CEOs.

Then, this past July, the company “got what it wanted,” in the words of Amy Calistri, chief investment strategist for Stock of the Month.

Amid much fanfare, Yahoo! (Nasdaq: YHOO) named as its CEO former Google (Nasdaq: GOOG) star Marissa Mayer, who at 37 became the youngest CEO of a Fortune 500 company.

Mayer was brought in to make Yahoo! relevant again. As The New York Times noted this week, the new CEO “has emphasized ways to modernize Yahoo!… to help them contend with ever-newer competitors.”

As a result, investors are getting what they wanted.

With a total return of 32%, Yahoo’s shares have beaten 98% of the S&P 500 since Labor Day.

I tell you all this because Amy added 300 shares of the stock to her Stock of the Month real-money portfolio at $16 per share. That was in early August, just three weeks after Mayer came on board. (Amy subsequently added another 150 shares, lowering her cost basis to $15.75 per share.)

In her August issue, Amy declared that the right change in leadership “can absolutely transform a troubled company.” So far, Amy has been right. Yahoo’s shares finished Friday at $19.64. Amy and her readers are up 23% on her original purchase.

But can it happen again? It already has.

In fact, the CEO card played a major role in Amy’s most recent portfolio addition, but with a twist…

In this case, the “new” CEO has been in place nearly five years, after an eight-year hiatus. What Amy found was a company whose CEO proved himself not once, but twice.

This founder and CEO left the top job in 2000, only to see store traffic slide in the years after to record low levels. By the end of 2007, the company’s share price had fallen more than 50% from 20 months earlier.

What happened next?

In January 2008 the founder took back the helm. “It was a tough year for almost every company as the global economy plunged into recession,” noted Amy. “But it was even more challenging for [this company]. Non-performing locations were closed. Expansion was redirected overseas. Quality and customer experience were reprioritized.”

But here’s the best part: The share price rose almost eight-fold in less than four years, from single digits in November 2008 to a peak of $62 earlier this year.

And a recent easing from those highs has made for an attractive buying opportunity, according to Amy.

Here’s more…

Bob: For those readers who haven’t already guessed, your most recent portfolio addition is Starbucks (Nasdaq: SBUX). What role did the leadership of CEO Howard Schultz play in your selection?

Amy: Identifying a battle-tested leader was paramount in the search for my December “Stock of the Month.”

They say a rising tide lifts all boats. In a rising market and rebounding economy, CEOs — the boats’ captains — are less of a factor. But when the market is fragile and global economic headwinds are blowing, I want a leader who has successfully navigated a company through difficult times. On that front, Howard Schultz has a track record that is difficult to rival.

In 2007, the share price of Starbucks dropped more than 40%. The company had become complacent with a model that prized expansion above all else. Margins were falling and earnings growth was slowing.

When Schultz returned to the company in 2008, the global economy was in a dire state. Most companies were struggling due to the recession… and Starbucks wasn’t fairing any better.  

To get things back on the right track, Schultz started closing non-performing locations, rerouting expansion overseas, and reprioritized quality and customer experience. After four years with Schultz back at in control, shares of Starbucks rose roughly 200%.

Bob: What other factors make Starbucks “Stock of the Month” worthy?

Amy: When I search for an idea, I look for the single best investment opportunity at that time. One of my key tenets is finding a trend that has been underestimated by the market.

Clearly Starbucks is known and appreciated by the market. This can be seen by its relatively rich valuation. Its forward price-to-earnings ratio (P/E) is 20.3.

Yet I firmly believe that the market will still be surprised by this company’s ability to generate growth in a challenging environment. Its management team, its diverse business model and lower input costs make it a triple threat in the throes of a profit battle. And should economic conditions improve, this stock won’t miss any of the upside.

For example, revenues for Starbucks’ packaged goods — the segment that distributes Starbucks brands to grocery stores — grew 33% in the fiscal fourth quarter. Although this group only accounts for roughly 12% of the company’s revenues, Starbucks has plans to double the segment’s international presence by 2015 and believes the group could overtake its retail store business in size and profitability.

The company is also about to acquire Teavana (NYSE: TEA), a 300-location specialty tea retailer. Teavana is primarily a mall-based outlet. But after the acquisition, Starbucks will start to open Teavana locations in high-profile neighborhoods, much like the current Starbucks store model. Over time, Starbucks locations will offer some Teavana products.

And in October, Starbucks started selling its Verismo single-serve coffee and espresso brewer. While you could always pick up small ticket gifts at Starbucks, this is its first foray into a big ticket item (in the range of $200 to $400, depending on the model).

Starbucks also has some added margin protection. The price of coffee beans has been in freefall, dropping roughly 40% since April 2011. That should act as a nice buffer over the next few quarters.

Bob: How can individual investors research management on their own? What are the key things they should be looking for?

Amy: When looking for a high-functioning management team, there are things to look for and things to avoid.

If I see a struggling company start to make overpriced acquisitions — as Hewlett-Packard (NYSE: HPQ) did when it bought Autonomy last summer — then that’s a red flag. To me it signals a panicky management team hoping to buy a quick fix to a failing business model.

Complacency is also a red flag. Until Lou Gerstner came along, IBM (NYSE: IBM) was banking on its legacy hardware business — long after computer hardware started to be a commodity. Likewise, prior to Mayer’s arrival at Yahoo!, the company continued to focus on Web traffic — once a meaningful metric — long after its revenues started to languish.

Somewhere between complacency and panic is the management sweet spot, and that’s what investors need to look for. Look for a company with a measured and calculated sense of urgency — a company with an unambiguous and executable vision — and you’ll find savvy leadership.

Bob: Yahoo! has had a great run this fall. Is it too late for new investors?

Amy: Since Mayer’s arrival, the stock has been on what I call a “relief” rally. It’s really been a joy to watch the company lay out a strategy that makes sense in the context of our current media and advertising environment. But while I think the relief spurt is over, I still think Yahoo! has the capacity to outperform the market as its financial performance starts to validate its revamped strategy. So I still think the stock has room to reward new investors.

[Note: Amy’s quest for winning investments doesn’t end with CEO background checks. A few months ago she uncovered a little-known investment that pays a 9% dividend yield… has doubled the performance of S&P 500 since the beginning of the year… and owns shares in some of the world’s fastest-growing companies. The best part? The government FORCES this company — and several others like it — to pay shareholders 90% of its profits. To learn more about Stock of the Month, and this stock, click here to listen to Amy’s latest presentation. Or you can follow this link to read the text version.]