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Is GMCR Ripe For a Takeover? 2.20.2013

GMCR has taken a huge hit since the highs put in around September 2011, just up over $100 a share. Currently they are trading at $45.35 a share, which is up from the lows at $18, which was last seen June 2012. Its pretty clear that this stock has been extremely volatile in the past couple years. I believe the main reason for this, is there initial first move introducing K-cups… people love to wake up and have their cup of coffee ready in 20 seconds. The negative part about GMCR was when their patents ended for the K-cups and allowed anyone to produce their own versions of the K-cup. It really adds insult to injury when Starbucks is one of your main competitors and they start to sell the same product, but with their brand behind it. It basically leaves Green Mountain without a true identity, and just another company in the coffee industry.

So, this comes back to the new CEO, Brian Kelley. Yes, I do believe that Coca-Cola would be a good fit for Green Mountain, and here’s why….

Coca-Cola obviously has enough cash to buy-up GMCR, which sits at a market cap of 6.75B + debt. Coke is also currently far from selling just a singe-beverage, as they have hundreds of brands under their name. Another argument is that Americans are shying away from consuming soda, and turning towards diet drinks, tea, and you guessed it…coffee.

Coca-Cola doesn’t necessarily ‘need’ Green Mountain, but the upside for it could be tremendous if marketed correctly. Obviously, they have Starbucks to compete against but people still know who Green Mountain Coffee is, and as time passes and Starbucks starts to take up more of the market share, that memory will slowly fade of GMCR even existing. A move needs to be taken soon if there is going to be Green Mountain on the shelves five years from now.

Author: Peter Nitso

pnitso@yahoo.com

Twitter: @PeterNitso

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Biggest Bearish Activity 2.19.2013

Bear CNBC Day TradingPaper bought 1070 PVR March 25 Puts for $.45 (6.4 times usual volume) when stock was trading $25.75
Paper bought 5200 FST May 6 Puts for $.65 (2.1 times usual volume) when stock was trading $6.34
Paper bought 800 LINTA March 21 Puts for $.40 (29.5 times usual volume) when stock was trading $21.59
Paper bought 900 ARLP June 50 Puts for $1.05 (23.1 times usual volume) when stock was trading $62.46
Paper bought 2145 AVID March 7.5 Puts for $.30 (29.4 times usual volume) when stock was trading $7.99

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Biggest Bullish Activity 2.19.2013

bullish Option Trade earnings.pngPaper bought 1200 AMKR March 5 Calls for $.15 (3.0 times usual volume) when stock was trading $4.79
Paper bought 2880 June 2.5 Calls for $1.85 (22.2 times usual volume) when stock was trading $4.22
Paper bought 1200 FCS March 16 Calls for $.25 (4.1 times usual volume) stock was trading $15.51
Paper bought 4500 KKR Jan 2014 17 Calls for $2.33 when stock was trading $17.91
Paper bought 1978 APO March 22.5 Calls for $1 (8.9 times usual volume) when stock was trading $22.78

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Unusual Options Activity Report 2.19.2013

rok-tabs-kotmPaper bought 20,000-40,000 TSO April 55-65 Call Spread for $2.30 1×2
Call Spreads (8.5 times usual volume) when stock was trading $55.09
Paper bought 20,000 HNZ June 75 Calls for $.10 (15.2 times usual volume) when stock was trading $72.13
Paper bought 39,800 CBS June 50 Calls for $.85 (3.9 times usual volume) when stock was trading $44.76
Paper sold 2800 GPS April 32 Puts for $1.17 when stock was trading $32.20
Paper bought 106,080 BX Jan 2015 30 Calls for $.43 (9.4 times usual volume) when stock was trading $19.32

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Rhetoric Aside, Where Does HLF Really Go From Here? 2.19.2013

Investors continue to ask the question… where does Herbalife go from here?

Well, Icahn believes the answer to that question is up. In his most recent appearance on CNBC, Carl said, “I buy things I think are undervalued.” From this statement it’s clear that he’s banking on making money from being long HLF.

I know quite a few investors will take his word and get long HLF as well…but do the charts line up with Icahn’s current view? Lets check it out…

Going back to the lows made in early 2009, it looks like a clear five waves completed in April 2012 at $73. Since that high, there as been a strong reversal, but it was done so in a corrective fashion (three waves). This tells me one of two things… one being that we are going to see a strong reversal right here ($38-$44), to bring us down in a fifth wave completing near the $10-$15 region. The second being that we have bottomed at $24, and will now begin a stronger third wave up that could take a couple years to complete.

When looking at both of these possibilities, the most probable scenario that I see playing out is a third wave up. The MACD is portraying some nice positive divergence, and gives me more confidence that we will see higher levels before we see lower. My initial targets are the $55-$63 region for (iii) of 3 before we see a stronger consolidation in (iv) of 3. By year-end I could even see wave 3 ending up near $72-$80!

When putting counts on a stock, you always need to have stops that invalidate your current position. If the price action falls below the $30.73 that would be my first indication that we are in a fifth wave down, with $23.91 being the nail in the coffin for the bulls. Bulls do not want to see it below that level!!

In the long I am optimistic on Herbalife, and have to say that Carl Icahn might have snagged up a ‘diamond in the rough.’

HLF 3Day 2.18.2013

Author: Peter Nitso
pnitso@yahoo.com
Twitter: @PeterNitso