Drink Coffee, Lose Weight: Top Coffee Stocks

by Fred Fuld III

If you drink coffee first thing in the morning, you may be doing something healthy for your body without even realizing it. Not only does coffee have energy-boosting properties, but according to a recent study at the University of Nottingham in the UK, coffee may help you lose weight.

The study was reported in the Scientific Reports Journal, and showed that coffee can stimulate good fat, referred to a brown fat, which can can generate heat and metabolize macronutrients by burning calories.

You can invest in coffee directly if you want. The price of the iPath® Series B Bloomberg Coffee Subindex Total Return ETN (JJOFF) has increased by 16.4% over the last three months. This consists of one futures contract on the commodity of coffee and allows investors to gain exposure to coffee prices without worrying about direct exposure to futures.

The potential health benefits may also compel you to invest in some coffee related companies. Your options include Starbucks (SBUX), Coffee Holding (JVA), Farmer Bros. Co. (FARM), Spot Coffee (Canada) Ltd. (SPP), and Youngevity International Inc. (YGYI). All of these stocks are traded on NASDAQ except SPP, which is traded on the TSX Venture Exchange — previously known as the Canadian Venture Exchange.

Most people are familiar with the global coffee powerhouse Starbucks. The company has over 28,000 stores around the world that sell coffee, tea, blended drinks, sandwiches, pastries, and many other food and drink items. As the largest coffeehouse chain in the world, Starbucks boasts a large market cap of over $102 billion and pays a dividend yield of 1.72%, which has been increased each year since 2010. The company has also increased its revenue each fiscal year since 2009. The stock has a fairly high price-to-sales ratio of 4.3, making itsomewhat overpriced. Starbucks’ stock has a price to earnings  ratio of 34.8, and a forward PE ratio of 27.3.

You may also want to consider investing in Coffee Holding, a wholesale coffee roaster and dealer that manufactures, roasts, packages, markets, and distributes roasted and blended coffee for private labeled accounts and its own brands. Its products can be divided into three product categories: wholesale green coffee, branded coffee, and private label coffee. With small market cap of $22.5 million, the company’s stock is very speculative. The stock has an excellent price-to-sales ratio of 0.25 though it trades at 102 times trailing earnings.

Another option is Farmer Brothers Company, a coffee foodservice company that manufactures, wholesales, and distributes coffee, tea, and hundreds of other foodservice items to retailers and foodservice providers. Its customers include hotels, offices, restaurants, convenience stores, and other establishments. The company has a market cap of $283 million. Its stock trades at 78 times forward earnings. It has a price-to-book ratio of 1.68 and a favorable price-to-sales ratio of 0.46.

Spot Coffee (Canada) Ltd. has a market cap of just $12 million, and the latter , making both these stocks very speculative. Spot Coffee (Canada) Ltd. is a Canada-based company that designs, builds, and operates coffee cafés throughout Canada and the United States. These cafés sell coffee, sandwiches, pastries, salads, and many other food and drink items. Most of the company’s revenue comes from sales at these cafés, licensing and franchise fees, and the wholesale of roasted coffee beans. The stock is trading at 37.5 times trailing earnings and pays a 3.07% yield.

Youngevity International, which has a low market cap of $173 million, is a company that develops and distributes nutritional products and commercial coffee. It operates in two segments, Direct Selling and Commercial Coffee, but generates most of its revenue from the Direct Selling segment. It offers a wide variety of products including gourmet coffee, skincare and cosmetic products, nutritional supplements, sports and energy drinks, fashion accessories, digital products, and organic food. The company  has a very favorable price-to-sales ratio of 0.77 and trades at 48 times forward earnings.

If you already drink a lot of coffee, maybe you should put your money where your mouth is and consider investing in the stocks of some coffee-related companies.

Disclosure: Author didn’t own any of the above at the time the article was written.