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Was 2011 a Good Year for Coffee Holding?

Investors' memories of 2011 will probably involve things like the debt ceiling, the Eurocrisis, and the fall of MF Global. For investors in the coffee wholesaler Coffee Holding (Nasdaq: JVA  ) , though, it might also involve the heart palpitations that come with watching a stock rise to over 600% return, only to crash back down to earth. Let's take a look at this company's tumultuous year.

Stats for Coffee Holding

Year-to-Date Stock Return 118.01%
Market Cap $51.5 million
Price/Earnings Ratio 14.77
Estimated 5-Year Growth Rate 16%
Dividend Yield 1.48%
CAPS Rating (out of 5) *

Sources: S&P Capital IQ, Yahoo! Finance, and Motley Fool CAPS.

A caffeine buzz for the books
The last 12 months were a crazy year for coffee prices, and this had a heavy impact on reliant businesses. The price of coffee hit 34-year historic highs early on, due to lower-than-normal supply and rising demand. Cooler temperatures in coffee producing countries were partially to blame for the low supply.

Along for the ride were coffee companies like Coffee Holding, Green Mountain Coffee Roasters (Nasdaq: GMCR  ) , Starbucks (Nasdaq: SBUX  ) , Caribou Coffee (Nasdaq: CBOU  ) , and Dunkin' Brands (Nasdaq: DNKN  ) , all of which were faced with the decision to pass on the price changes to customers or absorb them themselves.

A match made in java-dise?
Coffee Holding had an especially volatile year, currently up 118% after an initial 733% rise. The company is closely linked to Green Mountain Coffee Roasters, with the Vermont-based coffee brewer accounting for nearly 53% of Coffee Holding's revenue.

The company's relationship with Green Mountain is likely what helped spur Coffee Holding's spike beyond what coffee itself was doing. As Wall Street talked up Green Mountain, investors bought up Coffee Holding. And so it went until the stock price imploded with multiples twice what they are now, dropping nearly 62% in the last few weeks of September.

The stock price crept back up a little bit, but the final blow came in November, when David Einhorn called accounting shenanigans on Green Mountain. As you might expect at this point, Coffee Holding's stock fell another 28% that month. Ouch.

The volatility of this stock is only amplified by the large percentage of shares held short. This contrasts to a huge percentage of shares held by insiders. This appears to have a ying-yang effect for shareholders, with prices swinging wildly up or down.

For investors with the right timing and a stomach for high volatility, 2011 was a great year for Coffee Holding. For a great stock in 2012, you should click here to read our special free report: "The Motley Fool's Top Stock for 2012."

Fool contributor Amanda Buchanan holds no position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and Green Mountain Coffee Roasters, as well as creating a lurking gator position in Green Mountain Coffee Roasters. 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.

Read/Post Comments (1) | Recommend This Article (5)

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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 December 28, 2011, at 11:21 AM, buzzltyr wrote:

    I love starbucks becasue in this day of walmart employees starbucks are one of the few well managed stores, but I am thinking it is getting too pricey and might sell, Been a good one for sure.

    This was the year of restaurant stocks

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JVA $5.45 Down +0.00 -0.02%
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