Forget the technology bubble; shares of coffee companies like Starbucks, Green Mountain Coffee Roasters and Staten Island's Coffee Holding Co. are surging.
Print Email Reprints Comment
By Aaron Elstein
July 10, 2011 5:59 a.m.
inShare
2
1Share
iStock
[+] Enlarge
Since the start of the year, shares of Coffee Holding Co have soared 619%, to almost $27 a share from less than $4.
Also See
In the Markets: Big hurdles remain for NYSE merger
J.P. Morgan pays $228M to settle bid-rigging charges
There's lots of talk of an emerging bubble in technology stocks, but the really crazy action lies in coffee stocks. That's right: plain old coffee.
Shares of Starbucks are up 26% so far this year, while those of Green Mountain Coffee Roasters are up 193%. But the sector's perkiest stock is Staten Island's very own Coffee Holding Co., a family-owned operation that's been selling java under a variety of supermarket brands and other labels for around 40 years. How scorching hot is Coffee Holding? Since the start of the year, the stock has soared 619%, to almost $27 a share from less than $4.
One reason for the stock jolt: The price of has nearly doubled in the past year, yet Coffee Holding has largely been able to pass along rising costs to its caffeine-addicted customers. Net income nearly doubled in the first half of the fiscal year ending April 30, to $2.2 million on revenues of $63 million.
Dive deeper into the financial statement, though, and you'll see that Coffee Holding's formula for success isn't really selling coffee. Most of its profit actually comes from speculating in the coffee markets.
Like many companies that sell commodities, Coffee Holding buys contracts to protect itself against sudden price swings. If the price of coffee rises more than the cost that Coffee Holding has locked in via its futures and options contracts, then the company can make a tidy profit. And that's what has happened—big-time.
According to a disclosure buried in its latest quarterly report, the company recorded $1.9 million in gains from options contracts in the first half of the year—an amount equal to 86% of its profits.
There's nothing wrong with this, by the way. But investors should remember that futures and are volatile, so Coffee Holding's gains could vanish in an instant. As of the end of April, it had 231 on its books.
“It makes you wonder why the company bothers selling coffee and doesn't just play the futures market,” said Dmytry Shepsen, founder of Timeless Wealth, a Toronto-based investment firm.
The company didn't mention anything about its futures-trading prowess in its latest quarterly earnings release. Instead, it attributed its earnings growth to such things as rising forcing smaller roasters to buy its beans, its first sales in China and excitement over the ethnic coffee market after Smucker's bought Café Bustelo. (Coffee Holding's brands include Café Caribe.)
Whatever the reason, and other speculators are chock full o' nuts for the stock, whose ticker is JVA. Although only 2 million shares are freely tradable, four times that amount changed hands last week.
A call to Coffee Holding wasn't returned.
FINALLY: GOOD NEWS AT MORGAN STANLEY
10,539
Total words contained in a 27-page letter sent to federal regulators last month from Goldman Sachs, J.P. Morgan, and other banks objecting to new rules governing the trading of derivatives. The bank's missive warned that the rules could "damage the competitiveness of U.S. banking organizations and potentially the U.S. financial system itself."
It's surely not much fun at Morgan Stanley these days. The firm's stock is down 18% this year, and staffers at its Smith Barney brokerage division are getting axed.
But here's a bit of cheer: Morgan Stanley's business is growing faster than just about everyone else's. In the first half, the firm booked a 49% increase in global investment , to $2.7 billion, the biggest jump of any Wall Street shop, according to data from Thomson Reuters.
Morgan Stanley ranked third overall in the investment banking fees sweepstakes, behind J.P. Morgan Chase and Bank of America Merrill Lynch—and ahead of Goldman Sachs by $225 million.
Trouble is, investment banking fees are running about 20% below 2007's breathless pace. But that's a problem for another day.
A version of this article appeared in the July 11, 2011 print issue of Crain's New York Business.
inShare
2 Print Email
Filed Under : Banking, China, Coffee Holding Co., In the Markets, Morgan Stanley, Staten Island, Thomson Reuters, Wall Street
Where : New York, New York City, Staten Island
Top Headlines
10,000 reserve tix for 9/11 memorial
News Corp.'s scandal spreading to other papers
In the Markets: News Corp. board familiar with hacks
DOH wants national nutrition database
Greg David on NY: Debt talks and the meltdown risk
Stocks sink on fresh fears about global economy
MTA seeks an app for all of that
Busy management consultants have been hiring
MORE HEADLINES
Wall Street Headlines
Stocks sink on fresh fears about global economy
Coffee stocks: quite the hill of beans
Jono Steinberg steps out of Dad's shadow
Comment
What do you think about the article? Get your opinion heard! Comment now ›
Poll
Who's coming out ahead in the debt talks? Vote now»
Business Lists
Top Management Consultants Research now ›
Reader's Comments
Name: Miles E-mail: milesstoner@gmail.com (Your email address will not be posted on the site.)
Comment
Readers are solely responsible for the content of the comments they post here. Comments are subject to the site's terms and conditions of use and do not necessarily reflect the opinion or approval of Crain's New York Business. Readers whose comments violate the terms of use may have their comments removed or all of their content blocked from viewing by other users without notification. Comments may be used in the print edition at editorial discretion.
Daily Alert
A summary of the day's top business stories, including exclusive reports by the staff of Crain's New York Business.
VIEW SAMPLE | NEWSLETTERS
ADVERTISEMENT
UPCOMING CRAIN EVENTS
The Future of New York City 2011
Meeting the Growth Challenge
Tuesday, July 19, 2011
Join Crain's at the 2011 Future of New York City conference featuring 5 critical panel discussions and a lunch keynote address by Mayor...
DETAILS · REGISTER NOW
POST A JOBJOB BOARD
Account Representative
Brooklyn, NY - Perfect Choice LTD Co
PROVIDER MARKETING MANAGER
New York, NY - Healthfirst
Hiring Commercial Real Estate Professionals
New York, NY - ERG
On-site Real Estate Leasing Agent
New York, NY
Business Operations Manager
New York, NY - Success Charter Network
SEE ALL JOBS
POST A JOB FOR $200
Jobs by SimplyHired
Most ReadMost Recent
1. Big rise in rental charges for NYC apartments
2. Post-9/11 phoenixes thrive on entrepreneurship
3. Clueless in NY: the D.C. debt deal
4. Cuban eatery Havana Central goes suburban
5. Concrete workers could strike next week
VIEW ALLWHITE PAPER
Where's the Money?
How To use an adviser to navigate the new world of small business finance. Crain's aims to help you find the right adviser to...
MORE DETAILS
FOLLOW CRAIN'S
