Don't Drink This Brew

According to a Form 4 filed with the Securities and Exchange Commission (SEC), Green Mountain Coffee Roasters (GMCR) board member Susan Kilsby purchased 3,000 shares of the company's stock in late August at prices averaging about $85.50 per share. The shares have doubled, year-to-date, defying billionaire David Einhorn of Greenlight Capital's insistence last fall that even after an 80% decline, the company was still overvalued (the stock is still down more than 10% from its levels two years ago). The fact that an insider continues to buy the stock even after this recent rise is somewhat interesting, as, in theory, insider purchases should tend to occur when the insider is confident in the stock (otherwise he or she should instead choose to diversify their wealth).

Einhorn's argument for continuing to short Green Mountain Coffee Roasters was that competition was increasing among other providers of residential single-serve coffee systems -- including Starbucks's (SBUX) entry into the business. In particular, he predicted that Starbucks would help drive the industry toward more of a commodity business and shrink Green Mountain's margins....453 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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