You know that I recommended going long GMCR at$17. I rode it to $30. I am close to reentering there, but it isn't my top priority. All the analysts have it all upside down. GMCR occupies a VASTLY more strategic position in the retail coffee ecosystem than people are giving them credit for. As I've said, they have a huge installed base and many proprietary brands. They have already built out excess manufacturing capacity (taking a trick from INTC's use strategic capacity buffer) and others will find it hard to justify the ROIC of building contract manufacturing capacity. The deal with Costco shows that... At the same time, if we do go into recession, GMCR can ruin the retail coffee economics by slashing GMCR branded KCup pricing. SBUX has significant strategic and financial risks which are simply not remotely priced in. I'm more tempted to short SBUX than go long GMCR right now, but I might sell 2015 puts on GMCR....
On GRPN, absolutely. I'm happy to share more via email (not going to post more on specific strategy/trades here).
I know! That was a good call, that's why I ask. They are into Costco big time. Stores stocked very well with brewers and a lot of k-cups (but not a lot of skus) I think if they can convert that excessive inventory into sales it can get the stock moving. Also some rumors about international expansion. If they make some positive comments on that front it can loosen some of those weak shorts and cause a decent size squeeze. Coffee prices have come down considerably since last year too. Not sure if it will affect margins as I've heard they hedge again coffee prices.
I've read your argument for GRPN on other posts....definitely interesting.
On the AMZN front, I got an option question for you. If I had 245 puts and assuming the stock continues to drop, at some point would it be wise to get closer to the money and double up on the number of contracts? Or just hold since the premiums would be minimal? - PJ
Yes I do. Good to see you here. Unlike CMG, which had great unit economics but was vastly overvalued, AMZN has no such advantage. Ironically, GRPN is much better positioned strategically and financially than Amazon. Nonetheless, I expect it to get punished along with everything else, which is why I only bought 5K shares. As I said, I will double up at $2.50 and again at $2 (although I probably will double up before $2.50).
I would bite off 20-25% of your target position here and scale in... I am serious when I say that GRPN is strategically and financially better positioned than Amazon... Its capital intensity is modest and the sales cycle is heaviest/hardest when establishing new vendors/offers, so it will gain leverage over time (and GRPN can always have a RIF in a crisis where AMZN is locking in structurally higher costs with its buildout of unnecessary and redundant physical distribution centers).
This is just another case of a massively broken market. Growth funds will own/buy Amazon which anyone on the street can tell you is a massive bubble, but will dump GRPN even though its growth potential (from these valuations) is massive compared to Amazon. Use it to your advantage. Play on a different timescale. This is another great paired trade...