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Chris DeMuth Jr. is the founder of Rangeley Capital LLC. Rangeley is an investment firm that focuses on event driven, value-oriented investment opportunities. Rangeley Capital and his value investing forum, Sifting the World (StW), search the world for misplaced bets. Rangeley exploits them for... More
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  • My Monster Coke Habit 10 comments
    Aug 15, 2014 2:21 PM | about stocks: MNST, KO, NYT

    After yesterday's announcement was the first time in several years that I do not think that Coca-Cola (NYSE:KO) is about to buy Monster Beverage (NASDAQ:MNST). I thought that they could save a ton on distribution and marketing. The MNST stock offered great entry prices around the time of the occasional press observations that teens are idiots (especially teens that drink Monster) and drinking massive amounts of caffeine can cause one to get deadish. But, KO found a sensible route to avoid paying me a big premium. The market likes it all more than I do, so I am out and off looking for my next opportunity. Meanwhile, here is a look back at the past few years:

    One can readily ascertain the core Axe Body Spraying Demography from MNST ads. KO was probably right to keep a bit of separation between its corporate reputation and MNST's sexist ads, not to mention its potentially dangerous product.

    The peak frenzy around Monster Beverage and death as reported by Google searches was in late October 2012, when we first owned MNST. Here is how it has performed since then:

    (click to enlarge)

    This has been a good example of the aphorism that "if it is in the press, it is in the price". To that I would add my own addendum that if it is easy for the market to get right the direction (headlines with your product + "death" = bad) then it is hard for the market to get right the magnitude (since everyone tends to the same side of the trade and therefore overstates the severity).

    One of my favorite sources for inflammatory writing is the New York Times (NYSE:NYT)'s Gretchen Morgenson.

    It would be fair to describe her section of the paper as the anti-business section. Every business is a scandal, some of which have been reported and others that are left to be uncovered. The reporting tends to be purely allegorical, but statistically weak. Someone, often young and good looking, was one of tens or hundreds of thousands of people who was a customer of a given good or service. Then something horrible happened. Is that not outrageous and should we not condemn, unmask, and probably prosecute the horrible company that is probably in the business to kill their customers? Such articles can lead stocks to plummet. Nowhere does it report that the luckiest of the thousands of customers probably fell in love or received a windfall inheritance on the same day. Nowhere does it report that the average customer's day was… average. The key elements are always: 1) something horrible 2) big company and 3) the same vicinity.

    The difference between allegorical writing and the statistical reality of large companies with large numbers of customers can be a good place to uncover price opportunities. What does not kill you might make you richer.

    Stocks: MNST, KO, NYT
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Comments (10)
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  • Special Situation News
    , contributor
    Comments (297) | Send Message
    I wouldn't touch the beverage itself, but I sure wish that I had bought the stock. This is my favorite statistic about the company:


    Since January 2000, Monster, aka Hansen Natural, saw its stock rise 22,127%. That's the best performer in the entire S&P 500 over that time period. Are you kidding me?


    Have a great weekend!


    15 Aug 2014, 02:29 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (11813) | Send Message
    Author’s reply » I collect products related to our investments. The only one that I think I have neglected to sample is Newport cigarettes. I bought and sampled a Monster and thought it was as dramatically vile as anything that I have ever consumed. I could only get a small sip down.
    15 Aug 2014, 02:34 PM Reply Like
  • WaveRider007
    , contributor
    Comments (650) | Send Message
    Ah, the nicotine, caffeine, alcohol addiction is understated. First it is a repulsive taste, then it becomes normal, then it becomes desired. Perfect profit stream on a daily habit.
    28 Aug 2014, 04:00 PM Reply Like
  • foretherecord
    , contributor
    Comments (18) | Send Message
    try the fruit punch, its better haha
    15 Aug 2014, 02:51 PM Reply Like
  • Jake Roese
    , contributor
    Comments (23) | Send Message
    At least the Newport's may keep the Ebola at bay, as for Monster, that stuff will kill you.
    15 Aug 2014, 03:02 PM Reply Like
  • daytradermoneyballer
    , contributor
    Comments (77) | Send Message
    There's nothing wrong with monster, they are competing with red bull. We might not like their products i never tried monster btw but there's obviously a big market for them.teens love energy drinks... I think coke made a decent move with monster!
    19 Aug 2014, 12:30 PM Reply Like
  • LloydLeBlanc
    , contributor
    Comments (4) | Send Message
    Chris you get a pass on the Newports, menthol right?
    I have an older buddy who consumes massive amounts of Monster. I myself drink more coffe than I should but I cannot stand the taste or really the smell of Monster. It makes me wretch. Try Temple of Heaven's China Green Tea. I bought 500 grams of something called Special Gunpowder at an Asian Market. Corn sugar is really bad stuff, sorry KO.
    10 Sep 2014, 10:51 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (11813) | Send Message
    Author’s reply » MNST hit a new 52-week high
    22 Jan 2015, 01:54 PM Reply Like
  • sheldond
    , contributor
    Comments (1464) | Send Message
    I am pretty sure not many people over 20 drinks monster. Pretty nasty stuff with a killer marketing machine to grab kids attention. Imagine people binge drinking monster and then running around outside or better yet going to class or work. No wonder people love zombies. Any way to profit off zombies? Isn't that what investors do?
    22 Jan 2015, 02:18 PM Reply Like
  • bazooooka
    , contributor
    Comments (3688) | Send Message
    At 10x sales starting to look pricey. Gotta love the margins on sugar water though with this one still having a forward P/E just above 30 and growth still near 20% year over year. I'm ringing the register but would be afraid to short.
    29 Mar 2015, 07:48 PM Reply Like
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