One of the great maxims of traders and Wall Street pros is to follow the "smart money."

I'm not much for the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.

Next up: Green Mountain Coffee Roasters (Nasdaq: GMCR). Are institutions bullish or bearish when it comes to the coffee company?

Foolish facts


Green Mountain Coffee Roasters

Motley Fool CAPS stars (out of 5) *
Total ratings 1,021
Percent bulls 68.4%
Percent bears 31.6%
Bullish pitches 124 out of 193
Highest-rated peers Seneca Foods, John B. Sanfillippo & Son, J&J Snack Foods

Data current as of Nov. 27.

Among the pantheon of overvalued stocks that exist on our Rule Breakers scorecard, none elicits as much frustration as Green Mountain Coffee Roasters. Fools don't believe the caffeine high can last much longer.

"Over the past 12 months, this company has cash flow from operations of approximately $40 million. The market cap is currently approximately $4.3 billion, or roughly 110 times cash flow from operations. This is completely illogical for a company in a low-tech business like roasting coffee beans. At some point, [Green Mountain Coffee] is going to crash big time," CAPS All-Star investor Entrepreneur58 wrote earlier this month.

Fair enough. All growth must come to an end at some point. Trouble is, all forecasts for the end for Green Mountain were wrong. Both revenue and profit growth are accelerating and returns on capital are rising.

Institutional ownership history

Top Owners





Wellington Management Company





Fidelity Investments





William Blair Investment Management










Lone Pine Capital










Source: Capital IQ, a division of Standard & Poor's.
*Indicates the number of shares owned.

Institutional investors love this sort of performance, especially the short-termers. Their momentum-driven trading style requires betting on stocks that are routinely hitting higher highs. With few exceptions, Green Mountain has been that sort of stock.

And yet some institutions are as nervous about Green Mountain as Entrepreneur58. Lone Pine Capital has cut its stake by more than 50% since last December. Tremblant Capital, another top-25 institutional owner, has sold off 48% of its holdings over the same period.

Competitor and peer checkup


Institutional Ownership

Insider Ownership

Green Mountain Coffee Roasters 81.26% 11.98%
Jarden (NYSE: JAH) 94.45% 5.62%
Kraft Foods (NYSE: KFT) 76.13% 0.11%
Peet's Coffee & Tea (Nasdaq: PEET) 103.88% 1.84%
Starbucks (Nasdaq: SBUX) 75.92% 2.71%

Source: Capital IQ. Data current as of Nov. 27.

But these two are in the minority, as are most Fools. And looking at Green Mountain's ownership profile compared with its peers, I'm not sure the bulls have it wrong. Founder Robert Stiller owns nearly 11% of the business he started.

Institutions, meanwhile, own 81% of the business. That's roughly in line with its closest peer, Starbucks, but leaves room for Big Money investors to buy more if they continue to believe in Green Mountain's growth story. I still do; I'm sitting on a 13-bagger in CAPS and see no reason to sell.

Now it's your turn to weigh in. Do you think the institutions are wrong about Green Mountain Coffee Roasters? Let us know what you think using the comments box below. You can also recommend other stocks for me to evaluate by sending me an email, or replying to me on Twitter.

Interested in more info on Green Mountain Coffee Roasters? Add it to your watchlist by clicking here.

BlackRock is a Motley Fool Inside Value pick. Peet's Coffee & Tea is a Motley Fool Big Short short-sale recommendation. Green Mountain is a Motley Fool Rule Breakers recommendation and Starbucks is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. 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 is also on Twitter as @TheMotleyFool. Its disclosure policy is smarter than the average bear.