A Cramer coffee pairs trade: Peet's (PEET) versus Starbucks (SBUX)

Posted Sep 4th 2007 9:02PM by Jon Ogg
Filed under: Starbucks (SBUX), McDonald's (MCD)

On tonight's MAD MONEY on CNBC, Jim Cramer compared Peet's Coffee & Tea Inc. (NASDAQ: PEET) to Starbucks (NASDAQ: SBUX). He researched this after the death of Peet's founder last week, and found that he actually likes Peet's more from an investor standpoint.

If you want to read the full transcript summary with most of the reasoning, you can visit the comments. Cramer likes the multiples better and the measured growth ahead compared to what Starbucks faces in order to live up to growth plans. He's even worried that Starbucks might have to add 90,000 bodies. We have noted how Starbucks has lessons to learn from McDonald's Corp. (NYSE: MCD) and we did our own Starbucks store reviews and determined that the coffee (and now food and lounging) are in need of a lot of improvements if the company wants to pursue its aggressive growth strategy.

Interestingly enough, you could even make a PAIRS TRADE off of this if you wanted to bet one against the other. If Peet's goes up more or doesn't even fall as much, that is how you make money. This is where you'd essentially BUY PEET stock and SHORT SELL SBUX stock. Just keep in mind that doing such a trade has a risk that hasn't been there in the past. Starbucks is probably way too large to acquire, but with a $351 million market cap for Peet's, anyone could make that acquisition. The good news is that if that were to happen, it would probably work in your favor if you made the "bet with Cramer" trade.

Peet's shares closed up 1% at $25.55 today, but shares rose almost another 3% in after-hours. The 52-week trading range for its stock is $22.98 to $29.17.

Jon C. Ogg is a partner of 24/7 Wall St., LLC and produces the Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Tags: CNBC, Coffee, Jim Cramer, Pairs Trade, Peet's' PEET, Peet's'Peet

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Reader Comments (Page 1 of 1)

9-05-2007 @ 4:35AM

Andrew Porter said...

Starbucks is like a rash in the Uk - i think as it spreads in europe it will find much harder competition especially in say Italy, Holland and France where their quality of product will not measure up to the local competition - we compete at http://www.verdecoffee.com for a totally different clientelle with Starbucks which i suppose is a smaller proportion of the market place but that picture is not repeated throughout europe!

9-13-2007 @ 8:47AM

Chinese Whisperer said...

Coffee Pacifica, Inc. (CFPC) previously at $0.73 up 28% at $0.94 with 1,132,148 shares traded. (CFPC) was highlighted by StockEgg.com Stock Tiger, Bull in Advantage, OTC Picks, Stock Tiger , First Financial News, Stock Tiger and HotOTC.com.

Coffee Pacifica, Inc. announced that at its Annual General Meeting to be held on September 5, 2007, the company will seek shareholder approval to change the name of Coffee Pacifica Inc. to Growers Direct Coffee Company Inc. Shares were boosted today on the announcement of a joint venture agreement with China Capital Partners Inc. ("CCP") to establish coffee shops in China. The joint venture anticipates opening first coffee shop during the 4th quarter of 2007.

The company also announced that any effect on shipment of coffees from Jamaica due to Hurricane Dean will impact 2008 second and third quarters. Coffee Pacifica does not anticipate any negative impact on its revenue for the 2007 fiscal period.

Coffee Pacifica, Inc. is a distributor and a marketer in the United States, Canada and Europe of the green bean coffee grown in Papua New Guinea and "Penlyne Castle" brand "Jamaican Blue Mountain" coffee grown by Blue Mountain Coffee Co-Operative Society Ltd ("BMCC") of Jamaica.