2. PEET- Black Gold

Everyone wants a cup. 

There’s a battle going on in the coffee industry.  It looks like our big play of 2009, GMCR, has grown up and wants to play big boss in the coffee underworld.  To get you up to speed, all you need to know is that GMCR and PEET are trying to buy out Diedrich (DDRX) coffee.  Very interesting.  You probably know Diedrich as Gloria Jeans Coffee Bean, those little coffee kiosks all over the mall.  Diedrich has been around for a while now, so the goodwill value is high.  Of course, it makes sense for GMCR to buy DDRX since they work well together in the home-brewing market they popularized.  PEET tried, but it looks like GMCR’s offer of $35 is the winner (DDRX price on outstanding shares remains near that price).  So anyway, it’s been about 2 weeks now since that offer, so I expect more news to start kicking in.  And therefore, I think PEET will make their next move on the chessboard.  Should be fun… I mean, it’s nice to see some acquisition activity occuring in the market again- a solid sign of a bullish industry.  Remember, with the economy down, people will look for alternatives before they completely give up on a habit.  Therefore, instead of heading over to StarBucks to blow $4 on a machiatto, why not blend your own K-cup at home?  That was our theory that worked so well for iBC (check out GMCR scores on The PPT!).  But, the story is now getting old and too popular, so let’s give PEET a try.  The black-gold coffee industry will be a great place for traders in 2010.  Do it long or short, but mostly long.

Target = $44

GMCR target = $83

Note:  Meanwhile, there’s another PEET that is quite hot…