On my own Watch List now are many familiar names that have been written about in these Wealth Advisories during the past few months.  But not all stocks on your Watch List during difficult times have to be within a few percent of their price highs.

Take Green Mountain Coffee (GMCR), for instance.  It was a big winner in 2009 and early 2010, breaking out of its initial base at a split-adjusted 9.6 in March 2009 and advancing as high as 33.2 (again, split-adjusted) this spring.  But the stock fell apart in early April, as the company’s story was simply too obvious–too many traders and investors were following the stock after its huge run.  And what’s obvious in the market rarely works.

GMCR then collapsed even further after its quarterly report “only” met expectations (even though sales were up 68% and earnings were up 82%).  Part of that disappointment was because the company had production issues; some of its Keurig brewers were returned due to malfunctions.  I’ll call that a management problem.

Looking ahead, however, the firm’s growth prospects still appear to be excellent–analysts see earnings rising 50% in the June quarter, 91% in the September quarter, and another 45% for fiscal year 2011 (ending next September).  Longer-term, Keurig continues to gain market share among all coffee brewers, and that’s leading to a great recurring revenue stream, as K-Cup sales are expected to be up 75% this year.

Back to the stock, GMCR’s total correction amounted to 35% … at least so far.  That’s not unreasonable given the market environment and the stock’s prior advance.  But what really caught my eye was that, after bouncing from 22 to 28 during the market’s brief June rally, GMCR held up in the 25 to 26 area (well above its prior low of 22), despite the market’s plunge to new lows.  Call it the first inkling of relative strength.

I would also note that, during this correction, the stock took out both its 200-day moving average, and the low of its prior base.  Such actions are often enough to scare and wear out most of the weak hands … “re-setting” the stock’s advance and giving it a new lease on life.

Now, to be fair, the stock is still nearly 20% off its high and is 13 weeks into a base-building process that, in my opinion, is going to take longer to complete, even if all goes well.  There’s an upcoming earnings report toward the end of this month, too, which adds risk.  So I’m not a big fan of buying GMCR here, even if the market suddenly turns healthy.

However, this razor/razor blade story remains one that I’m attracted to, and in my experience, if the company’s sales and earnings continue to grow rapidly during the next quarter or two, the stock should eventually emerge from this consolidation and begin a new advance.  Of course, if management is unable to correct its production problems, all bets are off!  Either way, GMCR is worth keeping on your Watch List, and it should be interesting to see how it reacts to the earnings report later this month.