Macro concerns linked to the Crimean crisis and China were prominent this week and U.S. stocks suffered their worst weekly performance in seven weeks, with the benchmark S&P 500 falling 2% from last Friday's record high. The narrower Dow Jones Industrial Average (^DJI 0.30%) lost 2.3%. However, company-specific news had shares of Keurig Green Mountain (GMCR.DL) and Newmont Mining (NEM -0.61%) making solid gains on the week, while those of Herbalife (HLF -2.95%) fell sharply.
Keurig Green Mountain was the sixth best-performing stock in the Russell 1000 this week (+6.8%). Most of those gains were achieved on Friday, after the company announced a new manufacturing and distribution agreement with Peet's Coffee & Tea. Keurig will produce packs with Peet's coffee and tea varieties to be used with its brewers; in addition to Keurig's existing distribution channels, Peet's will sell the packs through its distribution system. Before the agreement, Peet's was the largest unlicensed super-premium coffee brand unavailable on the Keurig system.
The partnership was only made possible as Starbucks relinquished its exclusive license for Keurig's top-end coffee packs, in a modification of the five-year agreement the companies reached last year. Starbucks and Keurig Green Mountain announced the change in terms on Friday also.
Expect further stock gains on Monday morning, to reflect a third piece of news that broke after hours on Friday: S&P Dow Jones Indices announced that it will be adding Keurig Green Moutain to the S&P 500 after the close of trading on March 21. Keurig's shares have been a hunting ground for short-sellers over the past several years; still now, more than 8% of the outstanding shares have been sold short. However, the stock and the business have gained momentum over the past 24 months, as the company appears to be having genuine success at building its brand -- which is laying the foundation for a competitive moat. At more than 30 times the next 12 months' earnings-per-share estimate, the stock continues to look expensive on traditional measures of value; for my money, it's neither a buy, nor a short.
Newmont Mining was the seventh best-performing stock in the Russell 1000 this week (+6.4%). It appears the shares got a boost from the company's announcement that it had sold its 5.4% stake in Paladin Energy for $24 million in cash. While the sums in question are small, the sale demonstrates Newmont's commitment to its pledge to divest non-core assets. Newmont inherited the Paladin Energy stake from its 2011 acquisition of Fronteer Gold.
Newmont is a gold and copper miner and the price of the two metals has been divergent this year. Nevertheless, shares of Newmont have rebounded sharply off their Feb. 5 low of $20.87 -- which was more than a five-year low. I'm not a fan of leveraged bets on commodities prices -- which is exactly what mining companies are -- but momentum addicts and bottom-fishers may find their interest here.
I mentioned earlier that Keurig Green Mountain was a hunting ground for short-sellers, but that's nothing compared with the epic duel taking place over Herbalife, which pits two of the brashest, highest-profile activist investors against each other. This week, Bill Ackman of Pershing Square Capital Management won a field advantage as Herbalife disclosed thast it is the object of an FTC investigation; as a result, the stock was the fifth worst-performing stock in the Russell 1000 (-10.3% on the week.)
Ackman alleges that the multi-level marketing company is nothing more than a Ponzi scheme and says the stock is worthless; he's made that case to regulators and politicians, and some of them are clearly listening. But don't count out his adversary and Herbalife's largest shareholder, the legendary Carl Icahn. In the wake of the disclosure regarding the FTC investigation, the company announced that it would delay its April annual meeting by five days to consult with Icahn. You can read more of my thoughts on the situation in my article from Thursday, but the bottom line is that individual investors ought to sit this one out and enjoy the show instead.
