3 Coffee Stocks Brewing Up a Comeback
NEW YORK (TheStreet) -- Restaurants remain one of the key areas for job gains in this slowing economic recovery, and the stocks have followed accordingly. Where there's hiring, there tends to be good earnings reports.
Drilling down even further, coffee stocks have also had a good run -- especially category killer Starbucks(SBUX) . Any restaurant even associated with coffee has performed well. So it becomes difficult to dig out that rare restaurant stock or coffee maker that hasn't already run up.
Well, hold on to your mug, because the coffee stocks are about to get even hotter.
Arabica coffee has dropped below $2 per pound at a time when most coffee watchers predicted the price to remain flat. Brazil, known for its Arabica beans, is expected to have a record crop this year, and that has helped drive down prices further. Starbucks is a big buyer of Arabica beans.
Robusta beans are the cheaper of the two types of coffee, favored by consumer giants like Procter & Gamble(PG) and Sara Lee(SLE) . Indonesia, the third largest grower of the robusta variety, has increased production by 20%, the most since 2009. Smart coffee users will want to lock in these low prices on both varieties, and that will translate into better coffee earnings.
While coffee stocks have been hot, in the last few days the prices have pulled back a bit as investors have taken some profits off the table. This cooling off could be short-lived once the lower coffee prices filter down to the bottom line.