The Stock Market’s Coffee Craze

Despite a recession, these are hot times in the stock market for the coffee business. Shares of Green Mountain Coffee (GMCR), which reported impressive earnings July 29, are up 169% in 2009. One small coffee wholesaler, Diedrich Coffee (DDRX), is up 6,650% this year.

Even beleaguered coffee chains are bouncing back from steep declines in previous years. Starbucks (SBUX) shares have risen 87% in 2009, while second-place rival Caribou (CBOU) has seen shares quadruple in value (up 311%).

It’s not that coffee drinkers haven’t cut back somewhat on their daily caffeine fix–at least outside the home. Last quarter, Starbucks’ same-store sales were 5% lower than the year before.

Changing the Business

But the coffee business has been surprisingly resilient in the face of the steep economic slowdown. At the same time, powerful trends–new technology, changing tastes, and new industry players–have made many coffee stocks powerful investments.

Green Mountain Coffee got investors’ attention with the success of its Keurig coffee brewers. Costing about $100 each, these brewers make single cups of coffee at home in about 30 seconds. “Every 10 or 15 years something comes around that changes the way people drink coffee,” says Scott Van Winkle, an analyst at Canaccord Adams. Easy to use and easy to clean up, “this is the new thing in coffee brewing,” he says, noting sales of the brewers were up 187% last quarter.

Hot times in the stock market for the coffee business

Even beleaguered coffee chains are bouncing back from steep declines in previous years. Starbucks (SBUX) shares have risen 87% in 2009, while second-place rival Caribou (CBOU) has seen shares quadruple in value (up 311%).

It’s not that coffee drinkers haven’t cut back somewhat on their daily caffeine fix–at least outside the home. Last quarter, Starbucks’ same-store sales were 5% lower than the year before.

Beleaguered coffee chains are bouncing back

Green Mountain Coffee got investors’ attention with the success of its Keurig coffee brewers. Costing about $100 each, these brewers make single cups of coffee at home in about 30 seconds. “Every 10 or 15 years something comes around that changes the way people drink coffee,” says Scott Van Winkle, an analyst at Canaccord Adams.

Takeover Roasts a Hot Market for Coffee Stocks Roasts a Hot Market

Two small companies joining forces might not normally attract much notice. But the Nov. 3 acquisition of Diedrich Coffee (DDRX) by Peet’s Coffee & Tea (PEET) combines two especially hot stocks at a time when the coffee industry is an investor favorite.

The $213-million buyout of Diedrich caps an extraordinary stock market run. The Irvine, Calif., company’s shares traded at 36¢ at the start of 2009 and have rocketed more than 70 times higher, ending with Peet’s cash-and-stock offer of $26 per share.

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