Green Mountain Coffee Roasters (GMCR)
By
Brendan Coffey , Analyst and Editor of
Cabot Green Investor From Cabot Wealth Advisory, 5/14/09
Sign up for free Cabot Wealth Advisory e-newsletter As editor of Cabot Green Investor, I love uncovering companies with a firm hold in a niche area of Green. I also love getting subscribers into growth stocks that benefit greatly from a bullish market, like the one we find ourselves in now. Last July, I identified
Green Mountain Coffee Roasters (GMCR) as the next potentially great stock.
Coffee is a $70 billion retail market in the U.S., with 54% of Americans drinking an average of six cups a day. Overall, the market is a slow grower, rising just 2% a year. But the organic and fair trade segment of coffee has seen sales surge 32% a year for the past five years as consumers become aware of poorly paid farmers and the environmental problems with clear-cut coffee farms. Even with that growth, fair trade and organic is still just 3% of all coffee imports (only a small portion of coffee consumed in the U.S. is domestic, from Hawaii).
Vermont-based Green Mountain is the leader in fair trade and organic, with 25% of its product double certified as organic and fair trade, another 8% certified organic, and a further 14% farm-identified, meaning the company knows exactly where the beans come from, a crucial step in transitioning suppliers into fair trade and organic.
In New England and the Hudson Valley, McDonalds serves Green Mountain coffee co-branded with the Newman's Own label. Green Mountain also owns a category-killing technology—the Keurig. For those that don't know, the Keurig is a single serve coffee maker, offering coffee from basic Columbian decaf to rare exotics like Jamaican Blue Mountain. Green Mountain makes its own Keurig coffees and also licenses the rights to make K-Cups to others. Total sales hit $500 million for the year ended last September, part of an annualized 53% rise in sales since 2004.
Because of market conditions last year, I had subscribers keep Green Mountain on their Watch List, but since it never broke the price level of 40 that my technical analysis said was key, we never bought it. Just as well, since the stock slumped to 25 last fall. Still, I kept my eye on Green Mountain, and this April saw the fundamentals and the technical factors—including signs of fund accumulation and overextended short sellers—were dovetailing to form a potentially explosive combination.
I told subscribers to buy GMCR shares on April 15, and my model portfolio added it the next day at 51. On April 30, Green Mountain reported sterling sales of $193 million for its second quarter, up 60%, and announced that Wal-Mart will start selling its Keurig makers and K-Cups at stores nationwide.
Shares surged to 71 at the open that day and have continued chugging up to a recent price of 81, for a 59% gain for subscribers so far. And shares still look good to buy right now.
Editor's Note: Are you ready to profit from big gains like those seen in Green Mountain? Then let Cabot Green Investor Editor Brendan Coffey be your guide to the sector with the biggest potential since the Internet boom of the 1990s—the Green sector. Get on board early to experience the enormous profit potential savvy investors are already banking on. Click below to get started today.
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