Category Archives: GMCR

Keurig Green Mountain: Achieves Targets, Gets Buyout

Posted on December 7, 2015 by | Leave a comment

On May 19, 2015, we said the following about Keurig Green Mountain (GMCR):

"…the price of GMCR has declined below the conservative and mid-range downside targets of $110.08 and $81.40.  The acceleration of the current decline seems to indicate that achieving the $52.71 extreme downside target is very likely.

"A review of the last SRL done on January 11, 2013 shows that GMCR blasted through the extreme downside target by a wide margin.  The fact that GMCR is prone to extreme moves up and down suggests that the extreme downside target [$52.71] is the point at which to start assessing risk and accumulating shares."

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On December 7, 2015, Keurig Green Mountain was offered a buyout at the $92 per share or +77% above the December 4, 2015 closing price.

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Posted in buyout, Edson Gould, GMCR, speed resistance line, SRL

Green Mountain Coffee Roasters: On Target

Posted on August 6, 2015 by | Leave a comment

On May 19, 2015, we did a downside review of Green Mountain Coffee Roasters (GMCR) based on the work of Edson Gould.  At the time, GMCR was trading at $88.69.  Our downside assessment was as follows:

“As can be seen above, the price of GMCR has declined below the conservative and mid-range downside targets of $110.08 and $81.40.  The acceleration of the current decline seems to indicate that achieving the $52.71 extreme downside target is very likely.”

On August 6, 2015, GMCR declined as low as $52.40.  This falls well within the indications that were provided by Gould’s Speed Resistance Lines [SRL] at $52.71.  We closed our downside assessment of GMCR with the following comment:

“The fact that GMCR is prone to extreme moves up and down suggests that the extreme downside target is the point at which to start assessing risk and accumulating shares.”

Now that GMCR has fallen below the extreme downside target of $52.71, we think now is the time to review GMCR as a going concern for a potential transaction.

The Setup

Assuming that an investor is willing to accept total loss of funds, now is a great time to review the fundamentals of GMCR and determine if it will survive on its own or ultimately get acquired.  Below is the updated SRL based on the work of Edson Gould.

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Our best guess is that buying GMCR in three stages on the way down is the most “prudent” approach.  For those interested in the stock but don’t like the prospect of catching a falling knife, we’ve outlined three potential starting points for investment at $40.66, $31.33 and $23.04.  We’d suggest investments of 50%, 25% and 25% of allotted funds.

Again, this recommendation is not for the faint of heart.  Additionally, it is safest to assume all money put to this stock are a total loss and requires a significant amount of due diligence before any commitment is made.  From a historical standpoint, a  retest of the prior low ($17.25) is not unusual.

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Posted in Edson Gould, GMCR, Speculative Observation, speed resistance line, SRL

GMCR: Downside Targets

Posted on May 19, 2015 by | Leave a comment

On October 25, 2011 when Green Mountain Coffee Roasters (GMCR) was trading at $63.85, we projected conservative and extreme downside targets of $59.93 and $37.21, respectively.  Subsequent price action for the stock brought the price as low as $17.11.  After achieving the downside target the stock rose as high as $158.87 by November 2014.  The potential gains of acquiring GMCR below either downside target was +165% and +326%.

The problem with this modeling of the past is having the fortitude of buying the stock and watching it fall –66% before the subsequent rise.  Can you handle a decline of –50% or more in your investments?  If you can’t sleep at night with losses of –50% or more then don’t bother reading any further as what follows is speculation of what would happen if history were to repeat (NOTE: history does not repeat).

Alternate reading on portfolio losses of –50% or more by Charlie Munger.

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Posted in Edson Gould, GMCR, speed resistance line, SRL

Review: Green Mountain Coffee Roasters

Posted on January 11, 2013 by | Leave a comment

This is a follow-up to our May 2, 2012 piece on downside and upside targets for Green Mountain Coffee Roasters (GMCR).

At the time, GMCR had traded as low as $28.50 (-38.9%)  in after-hours trading.  We gave a downside target of $22.53 due to the fact that the stock had declined below our projected support level of $37.21, as indicated on October 25, 2011.  Since our May 2, 2012 article, GMCR has declined as low as $17.11, see chart below.

Continue reading →

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Posted in Edson Gould, GMCR, speed resistance line, SRL

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Edson Gould’s SRL: Chipotle Mexican Grill Downside Target Update

Posted on October 6, 2012 by | Leave a comment

In a series of articles examining Edson Gould’s Speed Resistance Lines (SRL), we put some big name stocks to the test.  The test was to see if Gould’s SRL had any reasonable predictive ability to determine the downside targets for the stocks in question.  The results have been astounding and are well worth your careful consideration.

First, we will review the SRLs for Netflix (NFLX) and Green Mountain Coffee Roasters (GMCR) and the outcome of the analysis related to Gould’s indicator.  Next, we will review the updated Chipotle Mexican Grill (CMG) downside target.

The first stock that we applied the SRLs to was Netflix (NFLX) on December 3, 2010.  At that time, NFLX was trading at $205.90.  When the stock rose to the eventual peak of $298.73, we thought that maybe the SRL was a waste of effort.

However, almost one year to the day after we ran the SRL on Netflix, the stock had broke through our conservative downside target of $117.76.  Even more amazing, NFLX later declined below the extreme downside target that we set at $68.63.  Today Netflix trades at $66.56.  Because we’re not short-sellers, we did not take any position on the decline of the stock.  However, we were able to buy the stock at $62 and sell the stock at $100 in the subsequent rebound from the initial low.

The next stock that we applied the SRL to was Green Mountain Coffee Roasters (GMCR) in our October 25, 2011 review of Edson Gould’s formula.  At the time, GMCR was trading at $64.75 after declining –42% from the peak in the stock price on September 19, 2011.  There were some who said that the stock was a bargain and should be bought.  However, Gould’s SRL indicated that at minimum, GMCR was to decline to $59.93 and possibly decline to the $37.21 level.

In a May 2, 2012 revision of Gould’s SRL for Green Mountain Coffee Roasters (GMCR), when the stock was trading at $28.50, we suggested that the stock could trade down to $22.53 with and additional downside target of $8.30.  Today GMCR trades at $22.13 (see chart above).

In the same October 25, 2011 review of Green Mountain Coffee Roasters, we covered Chipotle Mexican Grill (CMG).  At that time, Gould’s indicator suggested that CMG had a conservative downside target of $200.59 and an extreme downside target of $114.16.  As we’ve indicated in the past, SRLs are based based on the highest price the stock attains. In this case, CMG rose as much as +45.70% since our October 25, 2011 article.  Below is the revised SRL for CMG.

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Based on the high of $440.40, Chipotle Mexican Grill has a conservative downside target of $233.23 and an extreme downside target of $146.80.  We’re cautious about anyone who suggests that CMG is a “good buy” or “undervalued” at the current price. Already, we’re within striking distance of the $233.23 conservative downside target as CMG trades at $280.93 after hedge fund manager David Einhorn recently recommended selling the stock short (article found here).  If past use of SRL is any indication, when CMG declines below the upward trending conservative downside line, you can be assured that the stock will hit $233.

Again, our purpose of using SRLs to determine the downside risk of a stock that we’d like to buy but don’t want to chase.  We’re willing to wait for the eventual decline or admit that we missed the boat on a great investment opportunity.  Again, we don’t sell stocks short because we’re interested in acquiring great companies at the best price possible.

Disclaimer: This piece is a continuation of the examination of Edson Gould's speed resistance line as explained in prior articles. This is not an endorsement to sell short at the current levels nor buy these stocks once falling below the extreme downside targets since the stocks have been randomly selected, at best.

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Posted in CMG, downside, Edson Gould, GMCR, NFLX, speed resistance line

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Nasdaq 100 Watch List: May 18, 2012

Posted on May 20, 2012 by | Leave a comment

Below are the Nasdaq 100 companies that are within 10% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.

Symbol Name Price P/E EPS Yield Price/Book % from Low
FSLR First Solar, Inc. 13.66 - -7.01 0 0.4 0.08%
GMCR Green Mountain Coffee 24.05 11.56 2.08 0 1.74 0.17%
CHRW CH Robinson Worldwide 58.88 21.96 2.68 2.2 7.78 0.26%
EXPD Expeditors Int'l of Washington 37.32 21.57 1.73 1.5 3.8 0.38%
SYMC Symantec Corporation 14.74 9.39 1.57 0 2.12 0.41%
CTRP Ctrip.com International Ltd. 18.91 18.01 1.05 0 2.59 0.53%
SNDK SanDisk Corp. 31.52 8.81 3.58 0 1.12 0.59%
WYNN Wynn Resorts Ltd. 101.94 21.62 4.72 2 46.03 0.91%
RIMM Research In Motion Limited 10.99 4.95 2.22 0 0.58 0.92%
INFY Infosys Ltd. 42.87 14.29 3 1.3 3.69 0.97%
NTAP NetApp, Inc. 33.06 22.01 1.5 0 3.07 0.98%
FOSL Fossil, Inc. 70.28 14.99 4.69 0 3.9 1.02%
EA Electronic Arts Inc. 14.1 61.3 0.23 0 1.91 1.95%
APOL Apollo Group Inc. 32.02 6.97 4.6 0 3.54 3.52%
ORCL Oracle Corporation 25.61 13.42 1.91 0.9 3.05 3.60%
MCHP Microchip Technology Inc. 30.49 18.48 1.65 4.5 3 4.06%
VMED Virgin Media, Inc. 21.48 53.17 0.4 0.7 7.83 4.68%
GOLD Randgold Resources Limited 76.45 16.63 4.6 0.5 3.06 4.86%
NVDA NVIDIA Corporation 12.08 14.75 0.82 0 1.82 5.32%
AMAT Applied Materials Inc. 10.36 10.23 1.01 3.5 1.55 6.80%
VOD Vodafone Group plc 26.1 12.08 2.16 3.6 1.01 7.36%
LRCX Lam Research Corporation 37.57 16.62 2.26 0 1.73 7.93%
ALTR Altera Corp. 33.23 16.45 2.02 1 3.46 9.35%
SPLS Staples, Inc. 13.07 9.39 1.39 3.3 1.29 9.46%

Watch List Summary

We’d like to address the first four companies on our list with a rating of AVOID or SELL for the following reasons:

  • First Solar (FSLR):  We never believed in the attributes of the solar industry despite all the claimed benefits to the environment.  If a detailed examination of the solar industry was done for the period of 1970 to 1980, you would find that the reasons for the lack of success then is re-emerging today.  FSLR might be a great speculation, however, anyone wishing to buy the stock should be willing to accept 100% loss or avoid the stock altogether.  As was the case in the 1970’s, the “top tier” solar companies will probably get acquired by the major oil companies.  However, the timing of such an acquisition is too difficult for us to predict.  Therefore, the safest postures is to assume more downside risk with little sustainable upside opportunity.
  • Green Mountain Coffee Roasters (GMCR):  We’ve had a history of calculating the downside risk associated with GMCR.  On October 25, 2011 (found here), we published Edson Gould’s Speed Resistance Lines [SRL] which indicated that the downside risk for the stock was between $59.93 and $37.21 (at the time GMCR was trading at $64.75).  In that same posting we said that if GMCR were to fall below $37.21, then the next downside target is the absurdly low level of $3.  Even if $3 is never achieved, falling from the current price of $24.05 to $12.02 is too much pain to accept.
  • C.H. Robinson (CHRW) and Expeditors International of Washington (EXPD): Our recent Dow Theory (found here) indication pointing to an end to the bear market rally with the joint decline of the Dow Jones Industrial Average and Dow Jones Transportation Average means that large declines may lie ahead.  Since the Transportation Index has led the way up, it stand to reason, and experience, that the index will lead the way down.  We believe that CHRW and EXPD are in for more pain and faster than most other stocks because they are in the business of freight forwarding and logistics.

Companies that we’re excited to see on our watch list are as follows:

  • Microchip Technology (MCHP):  Microchip Technology first appeared on our watch list on March 20, 2010 (found here) at the price of $28.25.  Afterwards, MCHP rose as high as $41 by May 10, 2011.  On July 15, 2011, after the stock declined nearly -22% from the high, we suggested that MCHP would be too hard to ignore at such a high dividend yield. This recommendation was within 9% of the current 1-year low.  We will become serial acquirers of MCHP as the stock price declines further.
  • Applied Materials (AMAT), NVIDIA (NVDA), Altera (ALTR):   These chip stocks are runners-up in the chip stock sweepstakes.  We feels that accumulating of chip stocks with high ROA, ROE, profit margins, operating margins and low debt will prove highly profitable in both the intermediate and long term.

Watch List Performance Review

In our ongoing review of the NLO Nasdaq 100 Watch List, we have taken the top five stocks on our list from April 29, 2011 and have check their performance one year later. The top five companies on that list can be seen in the table below.

Symbol Apr-11 Apr-12 change
AKAM 34.43 32.59 -5.34%
TEVA 45.73 45.77 0.09%
CSCO 17.52 20.16 15.07%
URBN 31.47 28.96 -7.98%
MRVL 15.43 15.01 -2.72%
    Average -0.18%
       
Nasdaq 100     15.31%

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No two ways about it, the stocks on our watch list got hammered big time.  The Nasdaq 100 index gained 15.31% while our top five stocks went nowhere.  However, three of the five stocks our goal of at least 10% within a year.  TEVA gained 10% in the first month before declining –20%.  CSCO gained +10% in six months while AKAM gained +10% in 9 months.

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Posted in expd, fslr, GMCR, Nasdaq 100 Watch List, SYMC

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Green Mountain Establishes New Downside Target

Posted on May 2, 2012 by | Leave a comment

On October 25, 2011, we published a chart of Green Mountain Coffee Roasters (GMCR) that utilized Edson Gould’s Speed Resistance Lines [SRL] to determine what the possible downside targets might be.  At the time, Green Mountain Coffee Roasters was trading at $64.75.  However, our use of the SRL indicated GMCR had a conservative downside target of $59.63 and an extreme downside target of $37.21.

After reach the level of $59.63, GMCR’s stock price rose marginally before falling significantly to the downside resting at the $39.42 level.  Soon afterwards, GMCR rose as high as $70, but did not go above the SRL rising trend established at $59.63.

After reaching the $70 level, GMCR promptly fell to the $37.21 level which established what we believed to be a “support” level (green arrows; definition here).  Support levels, if broken, would result in the stock of GMCR going to the previous downside levels that helped to establish the upside trend at $22.53 and $8.30.

In after-hours trading on May 2, 2012, GMCR plummeted from the closing price of $49.52 to as low as $28.50, a loss of -42%.  We believe that GMCR  has a new support level of $22.53 and upside resistance (definition here) at $42.  If the price of GMCR falls significantly below $22.53 (i.e. $21) then we would expect that the new downside target of GMCR is $8.30.

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As an investor, if you have a stop-loss order (definition here) at $45, then you’ll only be able to get out of the stock at the next best price.  This means that if GMCR opens at $30 tomorrow, you’re only able to get out of GMCR at $30, not $45-$44 under normal market conditions.  Right off the bat, you’ll lose 33% more than you had planned. 

Typically, when a stock crashes it would usually rebound to a higher level before continuing the declining trend (if it happens to be going lower).  The stop-loss order will trigger automatic selling of GMCR even though we expect that it might rebound from the $28.50 low of today to, at least, $35.50 tomorrow.  If nothing else, selling on the short-lived rebound would reduce the amount of loss while a stop-loss order typically ensures the maximum loss in the shortest period of time.

This explains why we are against the use to stop-loss orders as a means to avoid losses.  The best way to avoid significant lose is to consider the downside targets before buying a stock.  After considering the downside, we recommend putting an amount that you’re comfortable with even if the stock were to decline -50%.

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Posted in Edson Gould, GMCR, SRL

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Nasdaq 100 Watch List: March 30, 2012

Posted on March 30, 2012 by | Leave a comment

Below are the Nasdaq 100 companies that are within 20% of their respective 52-week lows. Stocks that appear on our watch lists are not recommendations to buy. Instead, they are the starting point for doing your research and determining the best company to buy. Ideally, a stock that is purchased from this list is done after a considerable decline in the price and rigorous due diligence.

Symbol Name Price P/E EPS Yield Price/Book Div/Share % Chg from Low
FSLR First Solar, Inc. 25.05 -0.46 0.6 2.24%
EA Electronic Arts Inc. 16.49 -0.52 2.42 2.71%
CTRP Ctrip.com International Ltd. 21.64 19.29 1.12 2.74 3.00%
APOL Apollo Group Inc. 38.64 8.41 4.6 4.34 4.21%
CHRW CH Robinson Worldwide Inc. 65.49 25 2.62 2.00% 8.48 1.32 5.12%
VOD Vodafone Group plc 27.67 12.75 2.17 3.40% 1.07 0.95 13.82%
SRCL Stericycle, Inc. 83.64 31.09 2.69 5.95 14.50%
ORCL Oracle Corporation 29.16 15.28 1.91 0.80% 3.4 0.24 17.96%
RIMM Research In Motion Limited 14.7 3.46 4.25 0.69 18.07%
GMCR Green Mountain Coffee Roasters Inc. 46.84 24.11 1.94 3.67 18.82%

Watch List Summary*

Update: December 16, 2011 Summary Stocks

Today we’re going to review the price action of the Nasdaq 100 stocks profiled in the summary section of our December 16, 2011 watch list.  First on the list was BMC Software (BMC), we indicated the following about BMC:

  • “If BMC were to replicate the percentage decline from the May 2008 top to the October 2008 low, the stock would decline to a price of $31.11.”
  • “The $40 level seems reasonable within the next year for BMC even though it is 20% above the current price.”

BMC declined from the December 16th price of $33.17 down to the low $31.62 on January 10, 2012.  The actual low of $31.62 was within 1.64% of the projected downside target.  Additionally, BMC managed to close above the $40 level starting on March 26, 2012.

Virgin Media (VMED) was the second stock listed in our summary section.  We projected an initial downside target of $18.29.  This never materialized as the stock reversed its decline at $20.52, we said the following regarding the VMED’s upside target:

  • “The next upside target for VMED is $25.07 which assumes the best case scenario.”

From December 19, 2011 to February 7, 2012 VMED rose as high as $24.49 but struggled to move any higher.  On February 8, 2012, VMED jumped to $25.27 and managed to close as high as $25.93 on February 14, 2012.  This was a gain of +23.77%  in a month and a half.

Ctrip.com (CTRP) was the last stock that we reviewed.  At the time, we said the following about CTRP:

  • “…on a pace to replicate the performance from the high in April 2008 to the low of January 2009 which equaled a loss of -72%. A similar decline in CTRP from the high of $50.57 would bring the price down to $14.16.”
  • “CTRP sits one penny below the 2nd Dow Theory support level of $23.11. Any further deviation below the current price almost ensures that the stock is destined for the $10 range.”

On March 28, 2012, CTRP declined significantly enough below the $22.44 level for us to believe that the stock would fall first to the $14.16 level and possibly to the $10 range.

*Stocks that are in our Watch List Summary section are those that we find the most compelling among all the stocks that appear in the watch list above.

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Posted in apol, fslr, GMCR, Nasdaq 100 Watch List, ORCL, RIMM, SRCL, Uncategorized

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Green Mountain Coffee Roasters and Speed Resistance Lines

Posted on February 2, 2012 by | Leave a comment
On October 25, 2011, we posted a speed resistance line for Green Mountain CoffeeRoasters (GMCR).  At that time, we proposed,based on Edson Gould’s work, that the conservative downside target was $59.93while the extreme downside target was $37.21.
 

Sixteen days later, on an intraday basis, GMCR fell as low as$39.42.  This was within 6% of the targetedextreme low of $37.21. In this example, we’re satisfied that Edson Gould’s speed resistance line has met our expectations.

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Edson Gould’s Speed Resistance Lines: Chipotle & Green Mountain

Posted on October 25, 2011 by | Leave a comment
As described in our article on speed resistance lines dated September 22, 2011 (found here), Netflix (NFLX) has fallen below the level of $99.58 in a quick crash. At the time that we first ran the speed resistance lines on NFLX on December 3, 2010 we calculated a conservative range of $117 and an extreme range of $66.

Although we thought that the stock would be worth considering below the indicated levels, at the time, we had to concede that,  “the difficulty may be that the sentiment that pushed the stock price to $298.73 would likely be just the opposite to push the price down.” Therefore, we’re not buyers of NFLX at these levels. However, we wondered what Edson Gould’s speed resistance lines would say about two other stocks that have had tremendous increases recently.

The first stock is Chipotle Mexican Grill (CMG) which has had a tremendous run-up in the last several years. In the chart below we can seen that Chipotle has recently peak around the $342.49 level. Based on Gould’s work, the near term conservative downside target is $200.59 while the extreme downside target is $114.16. If the stock price increases above $342.49 then so too will the downside targets.
The next company that we’re interested in seeing the outcome on is Green Mountain Coffee Roasters (GMCR). It is challenging to believe that Green Mountain Coffee Roasters is going to increase above the prior peak in the near term. However, there appears to be a tremendous amount of downside risk for this company despite the decline that has already taken place. The conservative downside target is $59.93 while the extreme downside target is $37.21.  Green Mountain Coffee Roasters (GMCR) appears to have the worst technicals since a move below the $37.21 price could bring the stock down to the old support level of $3. 
We believe that it is worth examining whether or not these targets are accomplished. Chipotle Mexican Grill (CMG) actually appears to have some upside momentum in it still. However, we believe that the downside targets are reasonable estimates of where the stocks could go before initiating new research on whether these companies have viable business models.
Disclaimer: This piece is a continuation of the examination of Edson Gould's speed resistance line as explained in prior articles.  This is not an endorsement to sell short at the current levels nor buy these stocks once falling below the extreme downside targets since the stocks have been randomly selected, at best.
Those who understand interest earn it, those who don't pay it.

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Posted in CMG, Edson Gould, GMCR, NFLX, speed resistance line

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