So, I picked up shares of GMCR a couple of weeks ago, and have decided to hold.
My short tenure here has been interesting.
- Some poor analyst makes the (presumably correct) statement that BBBY will derive less of its revenue going forward from K-cups, and is variously heralded or eviscerated by GMCR stakeholders. A couple of years ago, BBBY was one of the few places you could get k-cups, and now they are everywhere, so BBBY gets less revenue. This is a good thing for GMCR
- An SEC case that is more than a year old seems to come up constantly, though it has found no wrongdoing
- Said SEC case is trumpeted by a blogger who brags of his white collar felony conviction in his signature, but has few credentials other than to say “they were accused of a crime, and I’ve already been convicted, so I should know about crime, and I say they are criminals”
- SBUX trades near 52-week high. They have CC where each presenter saves their highest praise for their wildly successful k-cup introduction, which is still ramping up. SBUX does not climb after earnings and people worry that this reflects on GMCR. SBUX CEO essentially says that they will take every cup that GMCR can make, and that’s a problem worth having for GMCR.
- A hedge fund manager (Einhorn) shorts GMCR, then makes presentation that GMCR involved in wrongdoing, and bolsters ppt presentation with data from another analyst. Shares of GMCR tank
- Original analyst that collected the GMCR data disputes, slide by slide, the false manipulation of data that Einhorn used in his presentation.
- Einhorn dismisses integrity of independent accounting brought in to review GMCR, and their subsequent finding of no wrongdoing. For good measure, in an unrelated case, Einhorn receives largest fine ever levied against an individual by UK for insider trading, and lack of integrity in explanation.
So, it’s been a fun ride, and the market will probably again remember that Greeks have big pensions, and may decide that this hurts the morning coffee choice of the US consumer (and everything else). Or, just remember that the Dow gets scared at these levels, and it’s time for everyone to press sell at once.
There is still a ton of fear with GMCR (miss by a penny and drop 40%, really?), but every new fact that comes out helps. This stock is still way undervalued, at a time when there are few bargains out there, and greed will beat fear again soon.
Final thought: Walmart may enter market. Okay, I get it, they are the largest retailer in the world, but if ever there was a product that could turn economies of scale on Wally, this is it. In 2012, there are 4,400 Walmart and Sam’s club stores in US. In 2012, there are 6,772 Dunkin Donuts in US and 17,000+ Starbucks worldwide (not sure on US #). This doesn’t count all of the supermarkets, etc carrying k-cups. Even if Wally could find a cheap way to get quality coffee, access to single cup builders, etc, GMCR could shave a couple of cents off of the k-cup, if necessary, and more than make up the difference in volume.
You never know if the market will react rationally and immediately reward a solid quarter by GMCR, but I’m comfortable with a long bet on GMCR at these levels.
You forgot to metion That Green Mountain HAS NO CASH ON HAND AND NO FREE CASH FLOW TO SPEAK OF!
Also,ya forgot to mention that the company GREEN Mountain has just been goin through its BIGGEST GROWTH PHASE in its history still to no avail with NO CASH FLOW TO SPEAK OF!
This tells one many things about the business model here.IT DOESNT WORK!IT IS ONLY AN ATM FOR INSIDERS AND WILL IN THE END BANKRUPT ALL SHAREHOLDERS BELEIVING THE FRAUD HERE!
Look at Diamond Foods with a market 1/8th Green Mountain with health cash flow and similar revenues!
Sure the stock MIGHT POP HERE WITH FRAUDULENT NUMBERS RELEASE BUT REMEMBER IN THE END THIS STOCK WILL BECOME WORTHLESS!
CONCLUSION:SHORT AT 105 WITH UPSIDE CALL PROTECTION TAKEN OUT SEVERAL WEEKS AGO!!!!!!>...... GOOD LUCK!
I took the analysis of bbby not to mean that bbby will get less revenue from kcups but rather that the growth at bbby is maxing out. As you stated a few years ago in many places they were the only real kcup game in town. If you check out a lot of their stores now, you will notice that many of them devote considerable space to kcups, like 30ft+ right in front. What more can they really do? which if youre watching bbby then yes it is correct to notice that they aren't going to get that easy bottom line gain from selling more coffee, but if youre watching gmcr as we are, who cares? I see that as a non-issue too
I see the stock is a bit ahead of itself. As we are now into a period of total intergration from last years purchases, I do not expect to see such huge growth number, but more of a steady line.
I am still very concerned about how bloated "Good Will" is - which seems to be accounting for a good deal of growth.
I still see this stock as a mid to high 30's buy in.
Thanks thoughtful, and good point about Walmart brand vs. premium brand. I believe that a high quality product and a huge increase in distribution will allow k-cups a competitive advantage for quite a while.
Current growth levels more than justify a high multiple, and that number will come down this year, as their various partnerships really come into bloom.