Common wisdom tells us that we should ride on the coattails of institutional investors such as hedge fund or mutual fund managers (aka smart money) as they have the sophisticated research and competitive edge over retail investors.
Therefore this article will draw on Greenlight Capital’s investment short idea on Green Mountain Coffee Inc. (GMCR, Financial). Instead, we will focus on long ideas, notably up-trending coffee stocks.More on the investment thesis here: http://dealbook.nytimes.com/2011/10/17/an-investor-creates-a-tempest-in-a-coffee-cup/?ref=business
Einhorn “criticized Green Mountain for “poor transparency.” He attacked the company’s financials, accusing it of “shenanigans” in how it accounts for acquisitions. The company had previously disclosed a Securities and Exchange Commission inquiry into its accounting practices. Mr. Einhorn also decried what he called out-of-control capital spending that he said was growing much faster than the company’s business.
The battleground over Green Mountain stock centers on the “K-Cup.” In 2006, Green Mountain, a company perhaps best known for delivering a decent cup of coffee at the local gas station, acquired Keurig, a business that manufactured single-cup brewing systems. The Keurig machine brews individual cups in less than a minute from coffee packed into single-use, plastic K-Cup pods.
Mr. Einhorn pooh-poohed the idea that K-Cups have revolutionized the way Americans drink coffee. He noted that drinking single-serve cups is “the expensive way to drink coffee at home.”
“This is a luxury item that is priced outside the range of many households,” he said.
What is more, Mr. Einhorn said, Green Mountain’s patent on K-Cup technology will expire in about a year, which will open the business to competitors.” More on GMCR below.
Green Mountain Coffee Roasters Inc. engages in the specialty coffee and coffee maker business. The company sources, produces and sells approximately 200 varieties of coffee, cocoa, teas and other beverages in K-Cup portion packs and coffee in traditional packaging, including whole bean and ground coffee selections in bags and ground coffee in fractional packs for use in at-home (AH) and away-from-home (AFH). It sells its products primarily in North America through supermarkets and convenience stores, in restaurants and hospitality, and to office coffee distributors, as well as directly to consumers via its Website. The company also manufactures gourmet single-cup brewing systems. In addition, it sells AH single-cup brewers, and accessories, as well as coffee, tea, cocoa, and other beverages in K-Cup portion packs, and offers other licensed roasters to retailers. Further, the company sells AFH single-cup brewers to distributors for use in offices. Green Mountain Coffee Roasters Inc. was founded in 1981 and is based in Waterbury, Vt.
The company's market cap is $11 billion, beta 1.1, and 82% institutional shares are owned of the company’s 120 million-share float.
We ran a stock screen for stocks trading with an up trend noted. Caveat is to scale down or exit a position once the trend halts, in the near few weeks’ time.
Farmer Bros. Co. (FARM, Financial) engages in the manufacture, wholesale and distribution of coffee, tea and culinary products. Its product line includes roasted coffee; liquid coffee; and coffee related products, such as coffee filters, sugar and creamers, assorted teas, cappuccino, cocoa, spices, gelatins and puddings, soup, gravy and sauce mixes, pancake and biscuit mixes, and jellies and preserves. The company distributes its products through direct and brokered sales to institutional foodservice establishments, including restaurants, hotels, casinos, hospitals, and foodservice providers, as well as retailers, such as convenience stores, coffee houses, general merchandisers, private label retailers, and grocery stores in the United States. Farmer Bros. Co. was founded in 1912 and is headquartered in Torrance, California.
Its market cap is $87 million, beta 0.97, 36.7% institutional shares are owned of the company’s 5 million-share float. Notable hedge fund, Renaissance Technologies LLC owns 1.1% of common stock outstanding.
Starbucks Corporation (SBUX, Financial) purchases and roasts whole bean coffees. It operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores. The company offers approximately 30 blends and single-origin premium arabica coffees. It also provides handcrafted beverages, such as fresh-brewed coffee, hot and iced espresso beverages, coffee and non-coffee blended beverages, Vivanno smoothies, and Tazo teas; and merchandise products, including home espresso machines, coffee brewers and grinders, coffee mugs and accessories, packaged goods, music, books, and gift items. In addition, it offers fresh food items, which comprise baked pastries, sandwiches, salads, oatmeal, yogurt parfaits, and fruit cups. Further, it also provides VIA ready brew coffee, bottled frappuccino beverages, discoveries chilled cup coffee, doubleshot espresso drinks, iced coffee, whole bean coffee, and ice creams. The companyÂ’s brand portfolio includes Tazo tea, Ethos water, SeattleÂ’s Best Coffee, and Torrefazione Italia Coffee. Starbucks Corporation sells its products in approximately 50 countries worldwide. Starbucks Corporation was founded in 1971 and is based in Seattle, Washington.
Its market cap $31bil, beta 1.28, 76% institutional shares are owned of the company’s 726 million share float.
Peet’s Coffee & Tea Inc. (PEET, Financial) operates as a specialty coffee roaster and marketer of fresh roasted whole bean coffee and tea in the United States. It offers whole bean coffee and related products consisting of products for home brewing, tea, and packaged foods; and beverages and pastries. The company also provides brewing equipment for coffee and tea; paper filters and brewing accessories; and branded and non-branded cups, saucers, travel mugs, and serve ware. PeetÂ’s sells its products through various channels of distribution, including grocery stores; home delivery, office, restaurant, and foodservice accounts; and company-owned and operated stores. As of January 2, 2011, it operated 192 retail stores in California, Colorado, Illinois, Oregon, Massachusetts, and Washington. The company was founded in 1966 and is headquartered in Emeryville, California.
Its market cap $819 billion, beta 0.69, and 103% institutional shares are owned of the company’s 13 million-share float. This stock is a short squeeze candidate with a short float at 27% (equivalent to 14.5 days of average volume).
Disclosure: No positions
Therefore this article will draw on Greenlight Capital’s investment short idea on Green Mountain Coffee Inc. (GMCR, Financial). Instead, we will focus on long ideas, notably up-trending coffee stocks.More on the investment thesis here: http://dealbook.nytimes.com/2011/10/17/an-investor-creates-a-tempest-in-a-coffee-cup/?ref=business
Einhorn “criticized Green Mountain for “poor transparency.” He attacked the company’s financials, accusing it of “shenanigans” in how it accounts for acquisitions. The company had previously disclosed a Securities and Exchange Commission inquiry into its accounting practices. Mr. Einhorn also decried what he called out-of-control capital spending that he said was growing much faster than the company’s business.
The battleground over Green Mountain stock centers on the “K-Cup.” In 2006, Green Mountain, a company perhaps best known for delivering a decent cup of coffee at the local gas station, acquired Keurig, a business that manufactured single-cup brewing systems. The Keurig machine brews individual cups in less than a minute from coffee packed into single-use, plastic K-Cup pods.
Mr. Einhorn pooh-poohed the idea that K-Cups have revolutionized the way Americans drink coffee. He noted that drinking single-serve cups is “the expensive way to drink coffee at home.”
“This is a luxury item that is priced outside the range of many households,” he said.
What is more, Mr. Einhorn said, Green Mountain’s patent on K-Cup technology will expire in about a year, which will open the business to competitors.” More on GMCR below.
Green Mountain Coffee Roasters Inc. engages in the specialty coffee and coffee maker business. The company sources, produces and sells approximately 200 varieties of coffee, cocoa, teas and other beverages in K-Cup portion packs and coffee in traditional packaging, including whole bean and ground coffee selections in bags and ground coffee in fractional packs for use in at-home (AH) and away-from-home (AFH). It sells its products primarily in North America through supermarkets and convenience stores, in restaurants and hospitality, and to office coffee distributors, as well as directly to consumers via its Website. The company also manufactures gourmet single-cup brewing systems. In addition, it sells AH single-cup brewers, and accessories, as well as coffee, tea, cocoa, and other beverages in K-Cup portion packs, and offers other licensed roasters to retailers. Further, the company sells AFH single-cup brewers to distributors for use in offices. Green Mountain Coffee Roasters Inc. was founded in 1981 and is based in Waterbury, Vt.
The company's market cap is $11 billion, beta 1.1, and 82% institutional shares are owned of the company’s 120 million-share float.
We ran a stock screen for stocks trading with an up trend noted. Caveat is to scale down or exit a position once the trend halts, in the near few weeks’ time.
Farmer Bros. Co. (FARM, Financial) engages in the manufacture, wholesale and distribution of coffee, tea and culinary products. Its product line includes roasted coffee; liquid coffee; and coffee related products, such as coffee filters, sugar and creamers, assorted teas, cappuccino, cocoa, spices, gelatins and puddings, soup, gravy and sauce mixes, pancake and biscuit mixes, and jellies and preserves. The company distributes its products through direct and brokered sales to institutional foodservice establishments, including restaurants, hotels, casinos, hospitals, and foodservice providers, as well as retailers, such as convenience stores, coffee houses, general merchandisers, private label retailers, and grocery stores in the United States. Farmer Bros. Co. was founded in 1912 and is headquartered in Torrance, California.
Its market cap is $87 million, beta 0.97, 36.7% institutional shares are owned of the company’s 5 million-share float. Notable hedge fund, Renaissance Technologies LLC owns 1.1% of common stock outstanding.
Starbucks Corporation (SBUX, Financial) purchases and roasts whole bean coffees. It operates approximately 16,858 stores, including 8,833 company-operated stores and 8,025 licensed stores. The company offers approximately 30 blends and single-origin premium arabica coffees. It also provides handcrafted beverages, such as fresh-brewed coffee, hot and iced espresso beverages, coffee and non-coffee blended beverages, Vivanno smoothies, and Tazo teas; and merchandise products, including home espresso machines, coffee brewers and grinders, coffee mugs and accessories, packaged goods, music, books, and gift items. In addition, it offers fresh food items, which comprise baked pastries, sandwiches, salads, oatmeal, yogurt parfaits, and fruit cups. Further, it also provides VIA ready brew coffee, bottled frappuccino beverages, discoveries chilled cup coffee, doubleshot espresso drinks, iced coffee, whole bean coffee, and ice creams. The companyÂ’s brand portfolio includes Tazo tea, Ethos water, SeattleÂ’s Best Coffee, and Torrefazione Italia Coffee. Starbucks Corporation sells its products in approximately 50 countries worldwide. Starbucks Corporation was founded in 1971 and is based in Seattle, Washington.
Its market cap $31bil, beta 1.28, 76% institutional shares are owned of the company’s 726 million share float.
Peet’s Coffee & Tea Inc. (PEET, Financial) operates as a specialty coffee roaster and marketer of fresh roasted whole bean coffee and tea in the United States. It offers whole bean coffee and related products consisting of products for home brewing, tea, and packaged foods; and beverages and pastries. The company also provides brewing equipment for coffee and tea; paper filters and brewing accessories; and branded and non-branded cups, saucers, travel mugs, and serve ware. PeetÂ’s sells its products through various channels of distribution, including grocery stores; home delivery, office, restaurant, and foodservice accounts; and company-owned and operated stores. As of January 2, 2011, it operated 192 retail stores in California, Colorado, Illinois, Oregon, Massachusetts, and Washington. The company was founded in 1966 and is headquartered in Emeryville, California.
Its market cap $819 billion, beta 0.69, and 103% institutional shares are owned of the company’s 13 million-share float. This stock is a short squeeze candidate with a short float at 27% (equivalent to 14.5 days of average volume).
Disclosure: No positions
