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Jonathan A Parker
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  • Is it Time to Climb the Mountain for Profits? Why we are Long GMCR….  7 comments
    Nov 27, 2011 9:23 PM | about stocks: GMCR, AAPL, NFLX

    Disclosure:  QuantX Capital, LLC and QuantX Fund, LLP own shares of GMCR

    Before I even begin to explain this position, I know what everyone is going to say; what the hell are you thinking?   I am going to my value and growth well to try to make some profits for our readers. Green Mountain Coffee Roasters (NASDAQ:GMCR) disappointed the street two weeks ago when it reported disappointing numbers and some accounting irregularities; however, there is still some upside to this stock. In an earlier post we argued the same for Netflix (NASDAQ:NFLX).  Here is the bottom line on this trade, before I even break down the numbers for you; this holiday season has started off with a bang, up 6.6% according to Bloomberg, and this can mean only one thing…...a huge demand for the Keurig coffee makers, which means GMCR can benefit in the short term.  

     

    Please note, I am not saying go sell some Apple (NASDAQ:AAPL) you have laying around and load up on GMCR, but what I am saying is this firm will benefit from a strong holiday shopping season.  I went to several Wal-Marts, Targets and Macy’s this weekend, and to my amazement, they were sold out of the Keurig Coffee Makers already, which means that this item will be a hot one for the season.  Let me briefly rebut the same argument everyone makes, that their inventories are too high, their patient comes off on the individual cups next year and that the company has had some accounting difficulty over the past 2 years.  All of this is true, but again, let’s focus on the next 90 days.  Keurig Coffee Makers will continue to blow out the sales in the stores and the GMCR cups that are required to operate in this machine, will fly right off the shelf.  This holiday season will be strong, which is why we are overweight retail going into the holiday season.

     

     




















    What we see here in the charts is simple.  GMCR is building a base for a short term pop.  We alsohave a convergence of the 50 and 200 moving average.  This could mean GMCR could be in for a short term bounce higher, and given the catalyst of the retail holiday season, we think it will move higher.

    Trade Thesis

    Here is our strategy for Green Mountain Coffee Roasters (GMCR):  Initiate position below 50 a share.  We have stops set at 45 a share and limit trades set for 60 a share.  This means that we are risking 5 to the downside, with the hopes of making 10.  A 10 move in GMCR would represent a 20% return and we like this as a play for the holiday season. 

    Also for the advanced traders, they might consider hedging with the dollar and trading future contracts in coffee.  Green Mountain will rise with the tide, but I just have a feeling, that they will outperform, and the Keurig will be a must have item for the holiday season.  Green Mountain is a must have equity for your portfolio.

     

    Stocks: GMCR, AAPL, NFLX
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Comments (7)
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  • CRG Research
    , contributor
    Comments (237) | Send Message
     
    -No technical bottom in place & a P/E of 38, signals more losses to come for GMCR investors.
    27 Nov 2011, 09:46 PM Reply Like
  • Jonathan A Parker
    , contributor
    Comments (6) | Send Message
     
    Author’s reply » Well, well, well, I guess the losses that are set to come are way, way, off. As stated in the blog, this is only a short term trade. Yourself, being a premier hedge fund manager, would understanding the idea trading for short term profit. I am no fan of GMCR, but I don't mind a 8.7% profit in 4 days. Not bad, furthermore my partners like making money. Hope you didn't short and you climbed the mountain for profits.....
    1 Dec 2011, 08:43 PM Reply Like
  • CRG Research
    , contributor
    Comments (237) | Send Message
     
    Haha..I didn't short it. GMCR didn't reach $60 yet, by the way. Although, it seems you locked in profit.

     

    I'm working on a short amazon.com position.
    2 Dec 2011, 06:30 AM Reply Like
  • Jonathan A Parker
    , contributor
    Comments (6) | Send Message
     
    Author’s reply » Hmmmm....GMCR seems to be at 58....I guess the losses are coming soon???? I am just trying to find a place to put all of this profit....LMAO, also, AMZN, will rip you face off if you are going short....I would take the other side of that bet any day.....
    5 Dec 2011, 09:38 AM Reply Like
  • CRG Research
    , contributor
    Comments (237) | Send Message
     
    If you want to take the other side of well positioned short entries and bet on AMZN over the next 1 - 3 years, be my guest.

     

    Party on!
    6 Dec 2011, 12:09 PM Reply Like
  • Jonathan A Parker
    , contributor
    Comments (6) | Send Message
     
    Author’s reply » I am not totally sure that your time horizon of 1 to 3 years is specific enough. We do not invest in 3 year cycles, but I would be more than glad to take the other side of that trade for 2012...Our partners want profits, not long term theories....we are partying on and GMCR high over a one week trade at 59.39 wasn't too bad. Full disclosure we sold at 56.36 and 58.61, so not a bad 7 day profit. I can't wait for what you say about our next blog about SIRI...

     

    Think DifferenT,
    Jp
    7 Dec 2011, 10:56 AM Reply Like
  • CRG Research
    , contributor
    Comments (237) | Send Message
     
    - Over the next 1 to 3 years the market should form another wave or two higher, if it is going to form another wave or two higher and not go into a bear market in the near-term. A bear market would follow, AMZN would fall with the rest of risk assets.
    - AMZN is trading near 100 times earnings, I consider the valuation to be too high.
    - AMZN's sales are growing at an over 30% pace, I believe the sustainable growth rate is closer to 8 - 15%.
    - I believe sales growth will disappoint growth investors at some point over the next 1 - 3 years and the valuation will decline by 25 - 90%.
    8 Dec 2011, 10:08 AM Reply Like
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