Thursday, March 17, 2011

Hot Coffee Stocks

News has been buzzing in the financial press recently about the possible takeover of Peet's Coffee (PEET) by Starbucks (SBUX). This is on the heels of the news about the partnership of Starbucks with Green Mountain Coffee Roasters (GMCR).

Some investors consider McDonald's Corporation (MCD) to be a coffee retailer. However, for retailers with a primary product of coffee, Starbucks is the largest, with a market cap of over $26 billion. The stock trades at 26 times current earnings and 20 times forward earnings. It also pays a yield of 1.5%.

Another way to play America's (and the world's) demand for coffee is to invest in the wholesale coffee roasters. Coffee Holding Co., Inc. (JVA) is a roaster of wholesale coffee which markets wholesale green coffee, private label coffee, and branded coffee in the United States and Canada. The stock trades at 13.5 times earnings and has a forward price to earnings ratio of 11. The yield is a generous 2.7%.

If you believe the price of coffee is going to rise, you can always invest in the iPath DJ-UBS Coffee TR Sub-Index ETN (JO), which attempts to track the Dow Jones-UBS Coffee Total Return Sub-Index.

For a free list of coffee stocks, which can be downloaded, sorted, and updated, go to

Disclosure: Author owns MCD.


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