7) Doesn’t hedging a long position with a short reduce total return? Shorting as a hedge was a great idea when Einhorn caused the fake panic. Shorting as a hedge makes sense if you see a stock market scenario of 2008 because the volatility in these shares will mean the computer models will drive them down more than an ETF. Help me believe those scenarios. If you are long, wouldn't it be more profitable to sell an out-of-the-money call at this point?
8) When the market has been down for a week, why did GMCR advance every day? Did the November 24 intraday computer-generated sell-off signal a technical bottom? Are we off to a new yearly high?
9) Who first said, “don’t fight the tape”? Have some shorts been covering since Thanksgiving? What else would make this stock advance so much?
What kind of investor would short a stock with a YOY 22% revenue gain, PE of 20, dividend of 1.4%, safe growth in double digits for 5 years, a recession-proof food company, no large number of shares held by panic sellers (like last year), and management buying shares? What are the factors that create a short squeeze?
"What kind of investor"? Consistent with what kind of investor would be in this stock long and unhedged at $70 today, it takes all kinds -- myopic cheerleaders and naysayers, the unsophisticated lot who don't really do any work but think they have a surefire winner or loser here; and sophisticated, critical thinkers who actually study serious allocations and know the potential outcomes here are varied on the SS coffee part, and, at this point, the carbonation hopefulness as well. The end game is also two headed. Might say KO pay a big boy price for the brewer, licensing, proprietary brand margin and carbo businesses in a couple years? Sure! But those businesses may also have a lot less value than some think.
Other than Einhorn and his birds of a feather, who assuredly have some offset longs/other SI offsets pending further playout here, the bulk of short interest is no doubt box hedges of long positions of players who understand the channel is stuffed for at least two Q and are also unwilling to ride this down if the revenue growth stall extends further or harder (mgmt has guided to high single digits for the next two quarters, not your "safe growth in double digits for 5 years") and margins get compressed on the same dynamics. Mgmt's comments on the "many new competitors" and "confident" more than only "several" will sign up to voluntarily pay GMCR licensing fees were also telling -- the company has several challenges with less than thrilling prospective outcomes these days.
You've been around this board a while (maybe longer than us when we came on at $18 just over a year ago now) might know we understand this story well, but we don't see any "short squeeze", perhaps ever, unless they plan to crush their single digits growth guidance combined with margins taking a let's say counterintuitive and sustained jump and or they come with a very strong carbonation product say 2-3 years ahead of what Kelley detailed as the 2-3 year timeline for that on Sep 10th.