The River Might be Deep, but the Mountain is Definitely High
Serge is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Green Mountain Coffee Roasters (NASDAQ: GMCR) has been recently under a lot of pressure and been criticized and crucified by many.
As for me, it has been one of my favorite stocks to watch for many reasons. Not only because it is incredibly volatile, but also due to a fact this particular company has so much to offer investors. Potentially, it can be a gold mine.
How is This Possible?
Well, - many of you probably heard, that Green Mountain has been battered into submission with a P/E ratio of just over 10. All of this happened due to many reasons and many of them are real issues that can hurt this company longterm. Expired K-Cups patents, new Verismo coffee machine released by Starbucks and the infamous accountancy issues - all are causes of a current share price downturn.
However, lets forget about all of that for just a couple of minutes and think outside the box. It is not easy with all the negativity trying to take over, but it can possibly lead you towards the right investing decision.
So, are there any positive things can be said in Green Mountain's favor? The answer is, - Yes, very much so.
Reason Number One - Strong Brand With Loyal Customer Base
Many of you will say, that it offers very little comfort when Kraft and other companies are trying to offer cheaper alternatives to K-Cups. I agree to disagree simply because many of the companies who will try to do it will fail. Why? Because some of them will not be able to produce volumes required by supermarkets, some will fail on quality and taste test. And Green Mountain offers both, powered by a big strong brand name.
Of course, people will give a shot to cheaper alternatives simply because it is human nature. But do you honestly believe people who were previously buying Green Mountain K-Cups will give up brand and quality for good? Very much unlikely. Kraft of course can be a bit of a pain for GMCR, not immediately and also they might hurt Tassimo coffee machine sales and contribute to Keurig sales as people will have more choice between K-Cups.
But this is another story to tell.
Reason Number Two - Expertise
As mentioned above, Green Mountain has a huge loyal customer base, mainly due to their expertise in the single serve coffee sector. They know how things are done.
Starbucks (NASDAQ: SBUX) has Verismo, but it has no experience at all in selling and maintaining single serve coffee machines. It will eventually gain the experience which hopefully will be a success, but until then it is not very clear of what should be expected in terms of quality, durability and customer service.
Keurig on the other hand has it all covered.
Reason Number Three - Going Global
I know what you are thinking now, - This is obscure and possibly not going to happen.
Well, - think about it. In North America the market is dominated by Green Mountain, but they haven't been anywhere else yet. And yes, - it is a huge world out there.
This is why you might have heard about the recent appointment of Gerard Geoffrion to be in charge of international business development for the company. You might have missed another appointment earlier in September of Michael Jacobs as Chief Logistics Officer.
International development and logistics?
Yes, these are vital preparations prior to international expansion, which might very much be a part of a plan drawn together with Lavazza to get a new espresso machine out.
And by the sound of it, this one might very much hit stores in Europe and become a direct competitor to Nespresso. However, I don't think Green Mountain will get George Clooney for its TV commercials. Sorry ladies, Nestle got him first!
For all the above reasons, Green Mountain looks like a very atractive and affordable investment.
Interested in Additional Analysis?
With Green Mountain as cheap as it's ever been, many investors are wondering whether this is the end of the former market darling, or the perfect entry point for an enormous rebound. You can find a recommendation for how to approach investing in the company in The Motley Fool’s new premium research report. In it you'll find everything you need to know about Green Mountain, including whether it's a buy at today's prices. Click here for instant access.
Foolioiam has no positions in the stocks mentioned above. The Motley Fool owns shares of Starbucks and has the following options: long DEC 2012 $16.00 puts on Green Mountain Coffee Roasters, short DEC 2012 $21.00 calls on Green Mountain Coffee Roasters, and short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Green Mountain Coffee Roasters and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.