Green Mountain Shares Dropped, Then Recovered: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Green Mountain Coffee Roasters (Nasdaq: GMCR  ) , the company behind the Keurig single-serve brewers, tasted particularly bitter to investors for part of the day today, as hedge-fund manager Whitney Tilson made some concerning remarks.

So what: Currently under examination by the Securities and Exchange Commission, Green Mountain has become a prime target for short sellers because of accounting questions and the stock's sky-high valuation. Today in an interview on CNBC, referring to the SEC investigation and the potential that it will uncover accounting fraud, T2 Partners co-founder Tilson said, "We think they are going to find something."

Now what: The fact that Green Mountain shares plunged so drastically and then recovered shows just how skittish investors are about the stock right now. Tilson -- along with Greenlight Capital's David Einhorn -- is a current "short" on Green Mountain, meaning that he has borrowed shares to bet against the stock. Just as bullish investors have their agendas when they talk stocks, bears often have money at stake as well, so it's best to view Tilson's comments in that light.

But is he right? This Fool isn't touching Green Mountain shares because they're simply too darn expensive. As far as the accounting goes, though, investors shouldn't be fleeing simply because of Tilson's remarks. However, his concerns are a good reason for bulls to take a closer look to make sure they're not sitting on a time bomb.

Want to keep up to date on Green Mountain Coffee Roasters? Add it to your watchlist.

Motley Fool newsletter services have recommended buying shares of and creating a lurking gator position in Green Mountain Coffee Roasters. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter, where he goes by @KoppTheFool, or on Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 26, 2011, at 5:22 PM, DonkeyJunk wrote:

    Reality catching up with enthusiasm.

  • Report this Comment On October 26, 2011, at 7:21 PM, Bert31 wrote:

    Can you explain what is a lurking gator position or is that a joke?

  • Report this Comment On October 26, 2011, at 9:05 PM, Clint35 wrote:

    A lurking gator refers to an options position that TMF options newsletter recommended. I can't explain it any farther than that, too complicated for me.

  • Report this Comment On October 27, 2011, at 7:19 AM, strabodon wrote:

    forget about the lurking gator Einhorn and Tilson are making millions using a hissing snake short straddle

  • Report this Comment On October 27, 2011, at 3:32 PM, chadscards1274 wrote:

    Matt, how exactly do you figure that GMCR is "too expensive" when it's trading at 25 times next years's expected earnings? Granted 25 times next years's earnings isn't cheap if we are talking about a company growing at 20% but GMCR has an expected growth rate north of 30% for the next several years. Given GMCR has beaten earnings expectations for the last several quarters in a row it doesn't seem to be too expensive by a standard PEG type analysis.

Add your comment.

DocumentId: 1577800, ~/Articles/ArticleHandler.aspx, 4/16/2014 9:29:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement