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6 Reasons Not to Buy Green Mountain on the Selloff

Stocks in this article: GMCR SBUX

Trading in Green Mountain Coffee Roasters has been volatile since Greenlight Capital hedge fund manager David Einhorn, famous for his short positions, revealed a major short position in Green Mountain last year and laid out what he views as accounting irregularities at the coffee company in a Powerpoint presentation titled "GAAP-uccino."

The once go-go momentum stock tanked, but also rebounded as part of the "junk" rally of 2012, which saw stock market dogs from First Solar (FSLR) to Netflix (NFLX) rise sharply in January and February.

The latest volatile trade in Green Mountain has to be viewed in the framework of its big run-up this year. Shares started the year at under $45 and had been as high as $69 earlier this month, Even after the 16% selloff on Friday, shares are still up 17% this year.

With much of the Green Mountain shareholder base concentrated in institutional funds that do not change positions quickly, mass profit-taking on the negative Starbucks headline from investors who bought after the massive slide in 2011 is no surprise.

The real issues for Green Mountain will come well after Friday's bad day if Astrachan is right. When it comes to Green Mountain, he has been on the right side of the trade before.

-- Written by Eric Rosenbaum from New York.

>To contact the writer of this article, click here: Eric Rosenbaum.

>To follow the writer on Twitter, go to Eric Rosenbaum.

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