Friday, April 15, 2011

Stocks of the Most Widely Consumed Psychoactive Substance in the World

Can you guess what 'the most widely consumed psychoactive substance in the world' is? It's not marijuana or cocaine. It's not alcohol (is alcohol psychoactive?). It is coffee. According to an article in the Public Library of Science Genetics Journal, there is statistical evidence that the consumption of caffeine may be an inherited trait based on genetics, not just due to demographic and social factors. (Thanks to Casey Research for fining this study.) Coffee drinkers are consuming about seven million metric tons of coffee every year. With this much demand, investors should take a look at the companies involved in the coffee industry, of which there are about ten, according to the list at

Starbucks (SBUX) is the largest coffeehouse company in the world, operating in 50 countries with over 17,009 stores worldwide. The stock trades at 20 times forward earnings and pays a yield of 1.5%. Earnings for the latest quarter were up 43.5% on an 8% increase in revenues.

Caribou Coffee Company, Inc. (CBOU) is another, albeit smaller, coffeehouse operator which trades at 20.3 times forward earnings. This Minnesota based company has over 500 coffeehouses. Earnings for the latest quarter were up 45.9% on a 1.8% increase in revenues.

Coffee Holding Co. (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 10.1 times forward earnings and has a favorable yield of 2.3%.

The iPath DJ-UBS Coffee TR Sub-Index ETN (JO) is an exchange traded fund which has a goal of tracking the Dow Jones-UBS Coffee Total Return Sub-Index. It has had a one year total return of 85.5% and a year-to-date return of 10.5%.

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

Disclosure: Author did not own any of the above at the time the article was written.


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