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It’s Been Fun

October 22, 2013 / By /
Stock (Symbol) Stock Price

Green Mountain Coffee (GMCR)

$24
Data is as of Expected to Report Sector

August 20, 2012

Nov 5

Food & Necessities
Sharek’s Take
David SharekGreen Mountain has had quite a year. The stock was around $100 a year ago and is now a dead-duck at $24. Why didn’t I sell earlier? Here’s why:

  • Why didn’t I sell when it was over $100? Well, I had owned GMCR since getting in on February 5, 2009 at $9. On the ride up I took profits and sold shares of the stock, when eventually I saw I had a ten-bagger but didn’t make ten-times my money in the stock because I had little left. Also, I stuck with GMCR years-ago when there was an SEC inquiry and was rewarded when the stock went from $25 to $100.
  • Why didn’t I sell after the stock fell into the $50s? GMCR was around $70 in November before reporting earnings. Then the stock dropped into the lower-$40s after it reported. There was no chance to get out. The following quarter, GMCR jumped from the low-$50s to the mid-$60s after reporting. Then the trend was up. The very next quarter the stock dropped from the high-$40s to around $25. So the trend was down-up-down. I expected another up was coming.
  • This quarter GMCR didn’t give me the good news I was looking for. Now the numbers have really deteriorated. At this point GMCR is more of a value stock than a growth stock. It’s not a stock market leader and I will sell my remaining shares from the Growth Portfolio today.
One-Year Chart
I want to point out GMCR was a growth stock one quarter ago: profit growth was a solid 33%. Pessimisom was high and I felt GMCR would beat the battered expectations. I didn’t. The stock is dead money now. But honestly the stock is where it was last quarter anyway.
Earnings Table
Profit growth was only 6% last quarter. Sales rose 21%. Profits should have been better.

GMCR missed previously reduced estimates by a penny. I really expected a beat (like the company did 3QtrsAgo).

Annual Profit Estimates just took a beating. Now analysts expect only 11% profit growth next year. Notice in Annual Profit Est. that estimates went down 4QtrsAgo, up 3QtrsAgo, down 2QtrsAgo.

Quarterly estimates continue to fall and now single-digit growth is expected. Time to sell.
Fair Value
GMCR is undervalued but this isn’t a growth stock any longer.
Ten-Year Chart
Yes, GMCR stock has been an excellent investment the past ten-years, compounding at a rate of 36% a year. Profits are also extensively higher than a decade ago: from six cents a share to over two dollars per share.
Power Ranking Bottom Line
Growth Portfolio

N/A

Green Mountain Coffee has had one of the best runs of any stock in the last decade. Even after dropping 75% from its highs, the stock has still gone from $1 to $24 in ten years. Unfortunatly, GMCR isn’t a growth stock at this point, and I will sell it from the Growth Portfolio today.
Aggressive Growth Portfolio

N/A

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