Green Mountain Coffee Spikes On Announcement of Stock Split

Are we back in the 1999 era when stocks spike higher on stock split announcements?

Green Mountain Coffee (GMCR) started moving higher last week, but then exploded after the company announced that it was effecting a 3-for-1 stock split. Do investors realize that stock splits don't add any real value?

click to enlarge

Regardless, the stock has gone parabolic, and is now overbought, and extended. I have taken a small short position on the stock, as I think it could retrace some of this recent run-up.

But the float is small, and the stock seems to being bought with reckless abandon. So I plan on keeping a tight stop-loss on the position.

Disclosure: The author is short GMCR.

Comments

[MrPositive:]

GMCR will continue going North because it has a broad base of coffee lovers who enjoy its taste and its one cup coffee machines. No Madison Avenue hype or "Grande Latte" mentality necessary !

2008 Jun 02 08:25 AM