Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

3 Top Movers: Keurig Green Mountain, Newmont Mining, and Herbalife

By Alex Dumortier, CFA - Mar 16, 2014 at 8:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Keurig Green Mountain and Newmont Mining outperformed on company-specific news, while Herbalife hit an air pocket.

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 ) lost 2.3%. However, company-specific news had shares of Keurig Green Mountain ( GMCR.DL ) and Newmont Mining ( NEM -0.05% ) making solid gains on the week, while those of Herbalife ( HLF -1.75% ) 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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
Keurig Green Mountain, Inc. Stock Quote
Keurig Green Mountain, Inc.
GMCR.DL
Newmont Mining Corporation Stock Quote
Newmont Mining Corporation
NEM
$56.36 (-0.05%) $0.03
Herbalife Ltd. Stock Quote
Herbalife Ltd.
HLF
$38.12 (-1.75%) $0.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
652%
 
S&P 500 Returns
142%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/09/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.