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Keurig Green Mountain, Inc. Message Board

  • mani_v_bea mani_v_bea Jul 19, 2012 12:14 PM Flag

    A sentiment from a Long Investor

    I found this from the comments page of seekingalpha article.

    Reasons to buy GMCR

    1- Ideal M&A candidate - Possibly Nestle's

    2- Distribution resources and expertise of K-cups would make GMCR the only reliable supplier. Competition cannot build a distribution system efficient and effective as GMCR in the near future. Intensive capital investment / Mangement / Customer base would be years in the making.

    3- GMCR missed estimates 3rd Calendar QTR 2011 and then smashed estimates succeeding QTR. Missed estimates last QTR and should exceed estimates 2nd Calendar QTR 2012

    4- Starbucks started selling K-cups in all their retail stores 2nd Calendar QTR 2012. Should increase earnings.

    5- Starbucks seems committed to strengthen relationship with GMCR

    6- Over 11 million shares traded Friday - It looks like shorts are starting to cover.

    7- There has not been any foundation to allegations of wrong doing in their accounting policies. Just a lot of talk. Inventory of K-cups are liquid - can be considered a form of currency (Current Assets). Any oversupply in one QTR increases sales in succeeding QTR. I was in Bed , Bath and Beyond a couple of months ago. For the first time some K-cups were on sale. (Holiday specialties ). Two days later they were cleaned out. Companies that manufacture durable goods and create excess inventory (Autos / Appliances etc) cannot be compared to a temporary oversupply of K-cups.

    8 - Could Kroger / Walmart / McDonalds use GMCR as their supplier ???. There are endless potential possibilities for the growth of K-cups manufactured by GMCR. Their quality / numerous established distribution facilities nation wide will continue to add growth and will prevail.

    Long GMCR

    My view...
    1) I add P&G/Starbucks & Kraft as well to the M/A list.
    2) The fall in coffee prices last quarter should have a positive impact in earnings.
    3) Anticipating new international partnerships to be announced.
    4) around $500 mil Buyback to be announced.

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