After looking through last weekend’s print version of Investor Business Daily’s “IBD 100” it was almost shocking on the surface to see that Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) landed the #1 spot on the highly followed “IBD 100.” After all, Barron’s simultaneously published a story called “BITTER BREW: Green Mountain May Burn Investors.” Then, even the Motley Fool posted “Barron’s Doesn’t Know Beans About Good Coffee.” What you are witnessing is a battleground stock.
This week we did a second take on the move in coffee roaster and coffee stocks, with some of the same caution about valuations in the run-up already seen. Last Friday the stock closed at $83.24, and that is after a massive run-up. Yet, this week the stock had only one negative day. Even then, that drop was not even by 1%. Yesterday’s gain to $89.77 was on over 1.5 million shares, and then today’s gain to $91.42 was on more than 1.1 million shares.
If you can imagine, Green Mountain Coffee Roasters is now a $2.3 billion company by measurement of its market cap. And the June 2009 call option activity is through the roof considering the open interest and considering it generally is not active in options:
Strike/Volume/Open Interst
85.00 444 2,433
90.00 387 3,588
95.00 724 2,989
100.00 1,501 999
105.00 766 2,318
110.00 552 136
120.00 447 83
To add insult to injury in this case of a battleground stock, the stock’s 3-for-2 stock split will be reflected on an ex-split basis after the close of trading on Monday. To call this one surprising on the earnings and valuation front is easy. And the pure technical traders who rely on charts such as IBD and others can say, “But the charts told you this was going to happen.”
Green Mountain Coffee Roasters true battleground stock indeed.
Jon C. Ogg
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