Year: 2012

GMCR, Green Mountain Coffee Roasters

Hamilton

gmcr

Through an acquisition of “Keurig” in 2006 this company effectively got a stranglehold on the single cup coffee brewing distribution system. The patents related to the K-cup system run out soon and this caught the attention of David Einhorn, a prominent hedge fund guy. Margin calls against the founder and other company heavyweights followed and here we are  at $22, not $115. Interestingly the “great recession” barely made a dent in this stocks progression, proving once again that you can open the monetary floodgates but you cannot control where the water will flow. By the way, “Keurig” in Dutch means exquisite, meticulous, perfect etc. and that describes the marketing niche that this company, or it’s founder created and capitalized on very well. In a way it is comparable to Krispie Kreme Dougnuts , KKD. Both are shown below on a semi-log scale;

gmcr 2012kkd 2012

Notice that the count on this semi-log scale chart is different from the one above as it puts the 4th wave on the way up at under $10 instead of around $20 to $30. No idea which is correct but in any event KKD goes from $50 to $1, so if GMCR does anything like that it could ultimately get to a little under $3. The irony is that much of the margin calls are allegedly related to a sizeable position by the founder of GMCR in the KKD stock. Birds of a feather, do flock together! Looking at it in more detail:

gmcr s 2012

It would appear that the C leg of the A-B-C is incomplete, still requiring a 5th wave down. Presumable, if it does that it could enjoy an exquisite bounce like KKD has had.

Comparable branding was done by Melitta, now more than 100 years old. As a private company no stock comparisons are available.

CUA.V CuOro update

Hamilton

cua agu 2012

As anticipated the incentive for management by way of options has all but been eliminated with the stock at these depressed levels. From $2.60 to $0.65 is around a nice Fibo 76% so it is possible that the stock will recoup some of its losses, but odds are overwhelmingly against a major rebound given their burn rate, the weakness of one of their backers and our low expectations with regard to the metal itself. Stand aside.

TRP update

Hamilton

Back on the 21 of Dec 2011 we expressed the opinion that one should stand aside. or perhaps even get short this stock at roughly $45, see the red arrow;

TRP aug 3 2012

We were wrong. Now 8 months later the stock is higher by a single dollar having been below that $45 level for most or even all of that time. It is not at all clear what the pattern is but I suspect that somehow a triangle is hidden in this chart. In any event the upside is very limited as becomes clear looking at the following charts;

trp big aug 3 2012trp aug 3 g&m 2012

As can be seen from the Bigchart the stock is right on the upper boundary. Looking at it from the 1980-ties, the stock is now trading above a channel that has defined it for most of that time. In 1980 20 year bonds were close to 20% in Canada at which rate your money more than doubles every 4 years (rule of 72). There are 6 such periods into 2000 so by that time you should have had 64X your money (abstracting from taxes , dividends and other minor considerations),and there are still 4 such periods left. Calculating value differently, by simple comparing prevailing rates, then 20% , now 4% the stock should be roughly 5x more valuable all other things being equal. It is not,just 4.5x.  Still a sell in our opinion.