Bought the $FARM

[guest post by TS]

Last Friday afternoon and over the weekend I was thinking about penning a somewhat derisive article about the coffee patch, about how JVA, CBOU, GMCR, SBUX, and PEET can fly so high, while the ho-hum performance of FARM just peters along a low level at about 0.25 sales.  While Farmer Brother Company's sales have been rising steadily YoY, they have yet to have a profitable quarter in at least the past four--clearly the fact that investors were ignoring them was quite warranted.

Then, this afternoon I was tracking the anti-negative-market antics of JVA and CBOU, when I saw this article NASDAQ stock posting largest percentage increases, I was floored by the first company listed:

"A look at the 10 biggest percentage gainers on Nasdaq at 1 p.m.:
Farmer Brothers Co. rose 21.0 percent to $11.68.
Vitacost.com Inc. rose 13.1 percent to $5.97.
Donegal Group B rose 12.2 percent to $19.53.
Quantum Fuel Systems Technologies Worldwide Inc. rose 10.4 percent to $5.26.
GSV Capital Corp. rose 9.0 percent to $17.65.
PDL BioPharma Inc. rose 8.1 percent to $6.22.
Coffee Holding Co. rose 8.0 percent to $28.90.
Caribou Coffee Company Inc. rose 7.6 percent to $14.63.
Vasco Data Security International Inc. rose 6.4 percent to $13.70.
Fst Savings Fncl rose 6.0 percent to $16.48."

I got in, then, at just over $12.  I could kick myself for not doing anything about FARM on Friday.  Of course investors would see JVA jump, see the apparently under-value of FARM (despite lack of earnings), and similarly pounce.  FARM was deservedly priced around $9 on Friday, and it serves me right that it should be at $12 this afternoon, and will probably close at $11.50 after I bought in  (somebody must be selling if I'm buying, right?). Alan Elliott posted for Investors.com last Thursday that "...dealing in coffee is no pledge of success. Coffee distributor Farmer Brothers (FARM) has only logged one profitable quarter since 2007. The stock is down 45% so far this year."

Have I just bought the FARM, or will this misbegotten company follow the other coffee companies to more than just a caffeine high?

..TS.

Have You Had Your Shot of $JVA Today?

[guest post by TS]

Last weekend I was listening to the usual podcast excerpts of Bloomberg's Taking Stock radio program, and came across a July 1 interview with Scott Rothbort of Lakeview Asset Management discussing the upcoming Dunkin' Donuts IPO.  In this discussion Scott mentions Caribou Coffee ($CBOU), which is the 3rd largest publicly traded coffee chain in the US.  Caribou was trading around 10 when Rothbort met earlier with Pimm Fox, host of Taking Stock, and is now up around 13.  Rothbort says that someone is accumulating stock, as the shares are trading higher on significantly higher volume.

Buy points:

• Michael Tattersfield, former CEO of Lululemon, is running the ship;
• Caribou in midwest, and has expansion potential as Dunkin Donuts is primarily in the Northeast and Starbucks & Peets are in the Northwest;
• Caribou is a take-over possibility, selling at only 0.9 times sales;

Risk is, as we approach August 4th earnings release, that momentum traders are buying and will dump the shares; Rothbort feels the action is not from momo traders but probably deeper pockets, like private equity, etc.

So, go out and buy Caribou (I'm long both equity and calls at the moment).

Is that it for coffee?  No, way.  Many people are looking all around the coffee patch.  Minyanville put together this very nice overview of the industry...and the big little name that jumps out?  While Green Mountain Coffee Roasters ($GMCR), with it's Keurig instant coffee, and Starbucks ($SBUX) with it's global presence (and Keurig connection) are the elephants in the room, the real darling (if you're interested in capital appreciation) is Coffee Holding Co. ($JVA).  Minyanville doesn't spend much time on JVA, but look at their chart in the article.  Up some 450% this year.  WTH???

This week, as I jumped on what looks like a very foolish bandwagon, JVA went from 16 to 26, and no apparent desire to back down, right through Friday's jobs report debacle.  The company started the week at about 0.8 times sales and finished at 1.17.  The caveat emptor, aside from such a stultifying run-up, is the very thin float: about 2.15M shares.  Sure, they may split a few times... but how many institutions can buy in such a shallow pond?  Also, no options are trading on JVA yet.

Where is JVA going?  Let us know here at Black Swans.

..TS.