Why Keurig Green Mountain Is Up 65% in 2014

Keurig Green Mountain is one of this year's biggest surprising winners.

Jul 3, 2014 at 10:02AM

Keurig Green Mountain (NASDAQ:GMCR) has been percolating this year. Shares of the undisputed champ of one-cup blasts of premium home- or office-brewed coffee have soared 65%, stunning naysayers who figured that its best days were in the past.

You don't have to look far to find the biggest contributor to Keurig Green Mountain's spike. Coca-Cola (NYSE:KO) paying $1.25 billion for a 10% chunk of the company sent shorts scrambling for the exits. The world's leading beverage company was not only validating Keurig Green Mountain's business, but also helping to improve its fortunes by offering its killer soft-drink brands to the upcoming Keurig Cold beverage system. The cherry on top came a few months later when it paid far more than roughly $75 a share to increase its stake to 16%. 

Coca-Cola is no stranger to taking sips of other beverage lines. It's not afraid to write big checks to diversify into juices, iced tea, and vitamin-fortified water. Coffee is a no-brainer, even if its role in the Keurig Cold maker of chilled carbonated and non-carbonated beverages is what's been hogging most of the attention behind the deal.

However, it's not just Coca-Cola turning to Keurig Green Mountain for a boost to its own flat sales. Keurig Green Mountain also helps out its own cause. Sales growth of K-Cups has been reportedly accelerating in recent months. Dougherty & Company issued a report last month, noting that K-Cup unit sales for the four weeks through mid-June had grown 11.5%, accelerating from the high-single-digit pace at which it had been moving earlier in the year. Argus Research then upgraded the stock -- as the first half of the year neared, it closed with a price target of $140, forecasting a 10% spike in sales growth this year. That is higher than the 8% top-line uptick that was the analyst consensus at the time. 

The momentum is contagious. Over the past few weeks alone, we've seen Subway announce that all 30,000 of its locations in the U.S. and Canada will bring on K-Cup machines to be able to serve fresh java all day long, BJ's Wholesale Club turned to Keurig Green Mountain for its private-label K-Cup offering, and global giant Nestle worked with Keurig Green Mountain to put out the first line of K-Cups with creamer included.

All of these developments aren't too shabby for a company that some had left for dead two years ago, when the key patents governing its K-Cup portion packs expired. Keurig Green Mountain has made the most of the leveled playing field, and the excitement for new platforms in Keurig 2.0 and Keurig Cold will bring new waves of patent protection. 

Along the way, Keurig Green Mountain continues to surprise the market. It has easily beaten Wall Street's profit targets over the past several quarters, and while there will be challenges in the future as it tries to succeed with Keurig 2.0 and Keurig Cold, investors are following Coca-Cola by buying into the resilient company.

Warren Buffett now has a stake in Keurig via Coca-Cola, but something should scare him
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash cow. While Buffett shakes in his billionaire boots, only a few investors are embracing this new market, which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains" behind the technology.

Rick Munarriz owns shares of Keurig Green Mountain. The Motley Fool recommends Coca-Cola and Keurig Green Mountain. The Motley Fool has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information