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Coffee Holdings-Insider Buying Spree Alert: CEO, CFO And Outside Director All Buy Shares

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Mark Krieger's Blog
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Long/Short Equity

Seeking Alpha Analyst Since 2008

I am a value/activist investor dedicated to the following ideals: (1) Focus on high relative strength, (2) Buy low, sell high aka "buy the dip, sell the rip" (3) Short high, cover low, (4) Go against the crowd, (5) It's all about the rules and discipline- hold them dear (6) Analyze the balance sheet-seek low debt,high cash and hidden value scenarios (7) Cut your losses short, let your gains run, (7) Don’t get emotional, (8) Follow the insiders- buy if they are buying, sell if they are selling (9) Be greedy when others are fearful and fearful when others are greedy.(10) Don't argue with the market unless you detect an inefficiency present-it is smarter than you are. In summary, some of these ideas might be construed as rather trite and overused, but consistent use of them pays off in the long run. Mr. Krieger specializes in the food sector and is the originator of the "Basic Food Fund" index and the "Dirt Cheap Value Portfolio".Why the food sector? "everybody has to eat'! He graduated from the University of Southern California with a BS in Business Administration with an emphasis in Corporate Finance. Mark resides in Cowan Heights, California with his wife, son and pug and is interested in mountain biking, gardening and reading.


  • Andy and David Gordon both buy shares in the open market. John Rotelli- Board member, joins the buying spree too.
  • earnings rose 250% from 2 cents to 7 cents, despite a 20% drop in sales.
  • CEO and CFO offer paycut.
  • bank loan reduced 50%.
  • 630,000 shares in options granted.

It was a great third quarter indeed. The fact that the company's (JVA) sales fell 19.7%, (from $22.1 million to $17.3 million) yet they were still able to more than triple their earnings, is a testament to a fantastically run organization. If it wasn't for the non cash charge of $189,769 recorded to the company's employee option plan, JVA would of produced a 10 cent bottom line (a 500% increase). In terms of shareholder's equity (book value), JVA was able to improve that entry 2% on a sequential basis, from $27.35 million to $27.91 million

how did they do it? They cut expenses and sold higher margined products (branded and private label) rather than wholesale green beans. The company's gross profit margin increased 300 basis points from 19.10% to 22.10%, while its operating expenses fell from 16% from $3.82 million to $3.25 million.

The coffee purveyor also revealed that they were able to pay their bank loan down nearly 50% during the quarter. During the end of quarter two, that "line of credit"  figure stood at $5.1 million. Interest expense fell 30% from $64,625 to $45,283. In addition, JVA received a paycheck protection loan of $634,480.

CEO Andy Gordon mentioned in his commentary that their fourth quarter is seasonally their strongest, and he expects the reopening of coffee shops and restaurants to add to that momentum. He also revealed that coffee prices have reached a new high on the year (although recently, prices have fallen nearly 15%) that will surely provide a tailwind. In addition, he announced that he and his brother will be taking a 5% to 15% pay-cut, starting next fiscal year. 

Finally, both Andy Gordon and his brother David Gordon each reported purchasing more shares for their own accounts, in the open market via form 4 filings with the SEC. Insiders buy shares for only one reason and one reason alone-to make money. Their buying certainly boosts the confidence level for the market. These guys are smart. They were able to get the stock up to $20 a share, in 2011. Just 1.5 year's ago, the  stock saw a run to $7. Unfortunately, I was too greedy and undisciplined to ring the cash register, OUCH. 

What's next? look for Mr. Market to show his appreciation, by marking up the shares, slowly but surely. A trip to the $4 area by the end of the year is not too far fetched. Although the shares have recently given up 20% from their recent highs, in the past two weeks, that discount should be pounced on. why?   because it sets up buyers for a 33% return in just the next three months.

The low down on  the officer's options: the CEO has the right to purchase 349,000 shares at $5.43 . The CFO has the same strike price, but his qty is slightly smaller at 281,000 shares. The expiration of the options occurs on 4/18 /29, while vesting is initiated in three equal installments, beginning 4/18/20.

here is the press release: https://finance.yahoo.com/news/coffee-holding-co-inc-reports-205800862.html

Fourth quarter results: the end of the year results won't be out until the last part of January, 2021. Until then, I assume the company will be as quiet as a "church mouse". 

Analyst's Disclosure: I am/we are long JVA.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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