I looked through all the public beer companies and found nothing interesting. My favorite alcohol investment is Central European Distribution (CEDC), which is leveraging leadership in the vodka business in Poland, Hungary and Russia to expand geographically while enlarging its product portfolio. It’s a good moderate growth story.
A more attractive beverage investment however, for investors who want fast growth, is Green Mountain Coffee Roasters (GMCR), which we’ve mentioned here before.
Michael Cintolo of Cabot Market Letter is a big fan of the stock; he added it to his Model Portfolio on May 5 at 50, and is now sitting on a 36% profit. In last week’s issue, he wrote this:
“Green Mountain Coffee Roasters has released a new iced tea product for use in its Keurig brewers, which could add a bunch more revenue during the summer. Fundamentally, we still enthuse about the company’s prospects, and the stock itself continues to act very well, busting loose from a six-week consolidation last week on heavy volume. But a big key will be GMCR’s reaction to earnings, which are due out Wednesday evening. We’ll be watching closely, but right now, the evidence is bullish. Sit tight if you own some, and if you don’t, wait for the earnings reaction.”
Well, the earnings came out and they were great; revenues grew 61% to $191 million, while earnings doubled, to $0.36 per share. But as Mike said, more important was the stock’s reaction to the report. It was volatile for the day, trading between 62 and 72 on four times average volume. But it finished up, and it’s traded tightly since, continuing to build a base that should eventually lead to a breakout above 70 … assuming the firm’s four million share secondary offering goes well in the day or days ahead.
Longer-term, the key attraction to Green Mountain is its razor blade business model. The recurring income from the disposable K-cups, which make you a cup of coffee for less than 50 cents, represents a very predictable stream of income for the company. If you don’t own it, it’s not too late to buy.