I have owned this stock for over 2 years having made my initial investment after using and then buying a Keurig machine for my home. My family and I absolutely love the k-cup and have saved handsomely versus buying Starbucks. GMCR is one of a few stocks that has made money for my family's savings over the last 18 months (imagine that!), but in these tough times, I have become worried about GMCR's valuation and am struggling with a decision to either hold or sell.
Worry 1: CASH FLOW
One thing management has not been able to accomplish is actual free cash flow. Cash flow from operations has never been enough to cover their capital expenditures. Green Mountain essentially produces $570m of annual revenue, but absolutely no cash from that revenue.
Worry 2: INSIDER SALES
Insiders have sold $60m in stock over the last two years, with the bulk of those sales occurring recently. I am less worried about this because insiders sell for numerous reasons. Nevertheless, the amount of shares that insiders have recently sold is striking.
Worry 3: HIGH P/E
On a trailing or forward basis, GMCR's P/E ratio is getting into nosebleed territory. Were the economy and the stock market in better footing, I would be less worried about this one, but a stock trading at a forward P/E of ~30x is not one I would be looking at for my current portfolio.
Worry 4: COMPETITION
Green Mountain isn't the only company out there that has seized on the nesting trend and single cup coffee brewers. Competitors like: 1) Tassimo, 2) West Bend 3) Senseo 4) Hamilton Beach 5) Precision Brew 6) Bosch 7) Cuisinart 8) Dolce Gusto, etc all offer at least the same hardware. And there are numerous coffee brands providing various single server discs. Is Green Mountain capable of growing marketshare in the face of this much competition?
Worry 5: DAILY TRADING VOLUME
As a rule, I avoid stocks that trade less than 1 million shares daily because I do not want to become the victim of manipulation. GMCR breaks my rule because it trades about 500,000 daily. Insiders own about 20% of the stock, or about 5 million shares, and the top 10 mutual funds own about 45%, or about 11.5 million shares. If just one of these decides to sell out of GMCR and harvest their gains (as I am contemplating) the impact on the stock price is likely to be severe because there does not seen to be a lot of trading interest in this stock.
GMCR has a market capitalization approaching $1.3 billion, and yet it earns a little over $30 million annually.
Can you guys offer your perspectives, whether you are a buyer, holder, seller or potential investor?
Guys like poster Braindamage are "a dime a dozen". They're late to the party and then too stupid to sell after they jumped aboard a moving train.
Look at the 2 year chart for GMCR, look at it very closely. Now consider the 52% short interest and add that to Braindamage's conviction to use a "buy and hold" strategy on this stock.
Actually I should be greatful for guys like him. They're what keeps the money flowing. To the guy that started this post....you probably timed your sale perfectly. GL
hgibsen...ok, now look closely at a five year chart or a max chart and that will give you the reason why the longs stay long. There are investors on this board that believe in this product and the potentials this company has. My 20 grand investment over ten years ago at close today is now worth over 250 grand. You do the math, I'll stay long...jmo
Simple math. New highs + tons of short sellers = sh!tted pants.
The earlier gentleman had a fear that a major holder could dump a bunch of stock and send the price down, but It could also happen the other way with a major short seller and send the price up. JMFUO.
you don't seem brain damaged to me. I couldn't agree with you more. Why would the longs sell now when the company is just beginning to head out west. So much growth potential left for this company even with this bad economy. Just my opinion...
Actually, I've BEEN long for a long time and feel better than ever about continuing to do so. This stock may be an anachronism given the current economic climate, but I believe more than ever that a "buy and hold" philosophy is truly going to work out best in the long run. And so do the overfilled roomful of shareholders I met at the annual meeting.
Why not take some money off the table. Sell what would amounbt to your initial investment and play with the house's money.
Nothing wrong with taking a profit-loll.
FYI I am long and a buyer on dips. Thinking 40-42 perhaps.
Congrats on your gain!