I attended the Keurig Green Mountain (GMCR) 2015 Annual Meeting of Stockholders on January 29, 2015. It was held at The Essex Resort & Spa in Essex, Vermont.
Green Mountain Coffee Roasters is one of the very few of my investments where I can actually participate in an annual meeting.
Below are some notes taken from the shareholder presentation…
Keurig Green Mountain’s vision is to become the world’s leading personal beverage system company (instead of coffee company).
FALLING KNIFE DEFINITION: A slang phrase for a security or industry in which the current price or value has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value, such as in the case of company bankruptcy where equity shares become worthless. A falling knife situation can occur because of actual business results (such as a big drop in net earnings) or because of increasingly negative investor sentiment. Source: Investopedia
I do like the falling knives! I usually find the best opportunities in the companies who’s stocks fall hard, some deserve it, but sometimes is unwarranted panic selling. I got many of my current holdings this way. I bought the bulk of my Merchant’s during the last economic crash when all banks were being sold no matter how safe/dull their business practice was. Cisco (CSCO), Keurig Green Mountain (GMCR), GE (GE) Google (GOOG), eBay (EBAY), Apple (AAPL)… I bought my stakes in all of these when people were overly pessimistic on them.
Why Catch Falling Knives?
Often, you will have companies have some bad news, maybe an earning or sales miss, an unexpected one time expense… temporary problems even though the company’s business is sound, the stock will drop hard. This makes for a great opportunity.
Some of the ones I’m looking to buy now are Staples (SPLS), Merchant’s Bank (MBVT), 3D Systems (DDD), Stratasys (SSYS), Amazon (AMZN), AT&T (T), Verizon (VZ), Sierra Wireless (SWIR) – either for the fact that they have fallen a bit, but still have sound fundamentals based on the current price or have decent dividends which help keep a floor on further downward pressure with great potential for upside.
But generally right now I’m putting together a nice list of potential ideas while keeping a wait and see attitude, waiting for the right time to strike.
MBVT is one that I’ve consistently held a core position while trading around it. I like it at $28.50 or less usually. At the last stockholder’s meeting (which I still need to post my write up on) they mentioned they are in the process of completely upgrading their computer system which will increase efficiency, customer service and lower overall cost. However, the whole cost of this upgrade is expensed this year so it could scare people (which it looks like is already happening) that just look at the numbers… could create a nice opportunity there.
I attended the Green Mountain Coffee Roasters (GMCR) Annual Meeting of stockholders today held at the Sheraton Hotel in South Burlington, Vermont. Green Mountain Coffee Roasters is one of the very few of my investments where I can actually participate in an annual meeting.
First, company business was conducted which included the name change to Keurig Green Mountain Inc. I do not agree that this was the best option. I would have preferred just Keurig which happens to own a coffee business called Green Mountain Coffee or Green Mountain Keurig if they must maintain both names which seems to flow better to me than Keurig Green Mountain, but it’s not a big deal. They are keeping the stock ticker as GMCR.
There was generally quite positive news from the company. A couple major new developments include the new Keurig 2.0 and Keurig Cold systems as well as news on the deal with Coca Cola, discussion on their competitiveness, concerns for the company and some financial highlights…
GMCR has a great network effect in that the more Keurig machines that are in homes and offices, the more brands that want to have their product in the machines. This then causes more people to want the machines in their homes/offices. Demand continues to build.
GMCR has a competitive edge that is unique in that they make both the machine and products used in the machine. The example cited was a laundry machine may be made by GE but the laundry detergent may be made by Proctor and Gamble, so the innovations may not be in sync whereas they are with GMCR.
Due to recent heavy drop in the share price Green Mountain Coffee Roasters Inc. (GMCR) we decided to reinitiate a position at the price of $25.67, which we believe to be quite fair.
Last year we bought and sold our position within a relative short time frame as the share price was quite volitile and fluctuated between our buy price and sell price range very quickly. We have kept our eye on the stock price looking for a good entry point once again.
Our feelings on the company have not really changed since last year. We think the business is relatively stable even though the share price may not be.
The biggest issues have been the expiring patents and the accounting irregularities which seem to be quite overblown. It seems that when there is bad news people are very quick to sell without regard to how much the news really impacts the business and likewise with the good news.
We will watch the price and there is a significant increase will most likely sell once again as it doesn’t usually take long for this stock to become overvalued.