Beating New Year Ennui
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
All the presents have been opened, the leftovers eaten (and why hasn't anyone written a song about the glory of holiday leftovers?), the holiday wine drunk and you're left feeling the grey overhang of the Schmiscal Cliff. The Dow has drooped under 13,000. There you are, in front of your trading platform hand on chin like Fran Kubelik (a very young Shirley MacLaine) in Billy Wilder's "The Apartment" at a club on New Year's Eve with her feckless married lover, insurance executive Mr. Sheldrake wishing her a Happy New Year. Glowing in the party lights comes her jaded reply, "Ring out the old, ring in the new, ring-a ding-ding," as the revelry swirls about her.
You have a serious case of New Year's ennui, the feeling that spring and love and profits are far, far away. No amount of seasonal spirits will ease that sinking feeling that all is drab, dull, dated, and dour. You have assembled a very respectable diversified portfolio of blue chips, techs, big caps, small caps, mid caps with yields and low P/Es. Nothing to reproach about your portfolio. All in all it's about as exciting as Mr. Sheldrake, beta-wise.
You need a shaker-upper, a momentum stock that will give you something to make the blood course like champagne bubbles. A spec that's slightly racy, maybe one of those that Herb Greenberg solemnly smirks about on CNBC. You need a tiny dose of a battleground stock, something a little bit volatile to give you a little joie de vivre.
A shot of Monster
Maybe a shot of Monster Beverage (NASDAQ: MNST) is just what the doctor ordered. Monster has had some monstrous public relations problems lately with concerns over the amount of caffeine in their energy drinks sparking lawsuits and governmental attention, but those concerns seem to have ebbed and the trendy energy drink company continues apace. Overseas expansion is a kicker to profits as CEO Rodney Sacks mentioned in the Q3 earnings release in November that sales to Chile, Peru, Singapore, Taiwan, Korea, and Central and Eastern Europe will begin in 2013.
The stock soared to a high of $83.96 last summer on rumors of Coca-Cola (NYSE: KO) acquiring the company. The rumors did make some sense as Monster has distribution agreements with Coca-Cola bottling companies and the energy drink market was scintillating. Coca-Cola doesn't have a strong energy drink on the market and they sorely need something to add to their "sparkling" market.
For those on the fence regarding overvaluation at a 28.67 P/E their sales growth rate is double that of their main competitor, privately held Red Bull.
Caveats are the high P/E, possible FDA and state regulation, and increasing competition as more companies like Starbucks jump on the energy drink bandwagon. But even with the annual EPS growth rate slowing by 4%, it is still a meaningful 19%, much higher than that of Coca-Cola or Pepsi-Cola.
Perk up already
Speaking of Starbucks, another battleground stock is competitor Green Mountain Coffee Roasters (NASDAQ: GMCR). This is a name that has had relentless negative sentiment over accounting issues since 2010, its relationship to Starbucks, and the loss of patent protection on its K-Cups leading to lower price generic K-Cups, even an as-seen-on-TV reusable "K-Cup." Negative comments from hedge fund investor David Einhorn of Greenlight Capital have damaged the share price in the past.
Despite those drawbacks, some catalysts include a new CEO, Coca-Cola veteran executive Brian Kelley, and an increase in the the sales of their Keurig machines by 49% over the prior period. Institutions are turning bullish on the name with a double digit increase in buys. While Monster may be slightly overvalued, Green Mountain may be slightly undervalued with a PEG of .84 and a P/E of 18.21 and a forward P/E of 13.53.
Since Einhorn once again badmouthed the company in October, its Q4 earnings report on November 27 buoyed the stock with a beat on earnings and revenues ($91.9 million and $946.7 million, respectively) with only 10% of sales coming from the K-Cups. The company also guided higher, expecting between 14-18% sales growth in the New Year. How does that compare with most of your blue chips?
The new CEO will also be flanked by a new Chairman of The Board, Norman Wesley, with top executive experience at Fortune Brands and a new independent director A.D. "David" Mackay, a former Kellogg's CEO. All these executive changes and earnings beats are generating renewed interest in the name.
A dash Of volatility
Maybe it seems counterintuitive to advocate a battleground stock for a portfolio but that little dash of volatility, like a hint of bitters in a champagne cocktail, is enough to get your juices flowing when your safe stocks barely move over the course of weeks, months. One tiny soupcon of spec will keep you checking on that portfolio and not forgetting your rock names. Also, it will give you something to talk about at parties. Chin-chin!
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Monster Beverage. Motley Fool newsletter services recommend Green Mountain Coffee Roasters, The Coca-Cola Company, and Monster Beverage. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!