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Keurig (NASDAQ: GMCR) will Survive

Forget Coffee Machines, Invest in Coffee Futures

Written by Jeff Siegel
Posted December 23, 2014

keurigsadI read this morning that Keurig Green Mountain (NASDAQ: GMCR) is recalling more than 7 million single-serve brewing machines because they might overheat and spray hot liquid in your face.

Well, that's no good.

Of course, I'm not much of a fan of the single-serve brewing machines.

Sure, they're incredibly convenient, but the coffee blows and those cups strike me as fairly wasteful.

But hey, a lot of coffee drinkers love some k-cup love. And certainly I have no ill-will towards GMCR. After all, I made a fortune off this one back in 2007, then again in 2010.

However, today I'm hearing a lot of talk about investors running for the hills as fear of recall backlash could send the stock on a downward spiral.

I actually don't think that'll happen. At least not to the point that it'll gut too much of the stock's value.

Keurig actually has a pretty good thing going. Especially with its recent acquisition of Bevyz, which gives the company access to a rather large market in the Netherlands and Malta. I suspect this recent news will just be an inconvenience that won't carry over beyond next quarter.

That being said, I do find the stock to be a bit overvalued, and don't recommend using this small drop in share price as a buying opportunity.

Coffee Futures Shine

If you're looking for something coffee-related to play in the market, you might want to consider coffee futures.

I crushed it this year by playing two coffee ETNs: the iPath Dow Jones UBS Coffee ETN (NYSE: JO) and the iPath Pure Beta Coffee ETN (NYSE: CAFE).

The tightening of coffee supplies as a result of a coffee leaf rust outbreak (a plant-choking fungus), extreme weather, and health scares in coffee growing regions in Africa pushed coffee futures to record highs this year.

The only thing that's really kept it from getting worse was a higher-than-expected crop forecast in Brazil.

Still, coffee soared nearly 60% this year. And word is, at least in Africa, it's only going to get worse.

So keep a close watch on coffee futures in 2015. And if you want to play this angle, the easiest way to do it is with those two ETNs: JO and CAFE.

In the meantime, consider upgrading your coffee experience by shit-canning the single-serving machine. Learn how to roast your own beans (which is incredibly easy), and get yourself a decent French Press or, my favorite, an Aeropress. There's no better way to squeeze that delicious nectar from those wonderful, life-altering beans.

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