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Thursday, September 14, 2006

Who IS Right on Hansen Natural? Cramer or Goldman Sachs?

By now we all know that Hansen Natural Corp. (HANS) has developed into a cult stock, and it definitely is not without controversy. It is a high growth maker of natural sodas, energy drinks, sport drinks, and fruit juices; but it has been highly criticized over valuations by many pundits. From the end of 2004 this ran from under $5.00 up to over $50.00, and that is after two stock splits. Needless to say, it has had quite a pullback lately. The stock still has a P/E north of 30 and the street expects it to earn $1.10 EPS in 2006 and expects EPS of about $1.58 to $1.63 in 2007.

The stock is up 8.6% at $32.32 this morning, and that has taken the stock back over its 200 day moving average of $32.05. It has already exceeded its 7.2 million average daily trading volume with some 9.4 million shares having traded hands.

Last night Jim Cramer on Mad Money slammed this company. He compared its "trajectory" to that of the fat-farm fuelling Krispy Kreme Doughnuts (KKD) because of its stock performance. He did not say the company had the same underlying issues, and he did note that they actually have a good accounting practice. He said that investors should take advantage of yesterday's 4% gain and sell the shares. In fact, he said the company was done and may never come back. Those are powerful statements. At one point the stock was down almost 2% from its closing price in after-hours trading last night.

This morning Goldman Sachs added HANS shares to what it calls its "Conviction Buy List." The broker started the company with an Outperform rating back in May when the stock was in the $40's and it still had a lot of positive momentum. HANS stayed higher in the $40's and $50's for most of the summer, but at the beginning of August it fell out of bad and gapped down to just under $30.00 on a disappointing earnings reaction. Today's research note said that the recent weakness over concerns of moving into the the Budweiser wholesaler network has created a buying opportunity for long-term investors. It even noted that it could go back up to $55.00 over the next year.

Whenever you get a controversial stock that moves into what is a cult status, you get buying and selling galore. The company had 13 million shares of its 60.4 million float short last month, but that was actually down from 16.2 million shares short the month before. This is a true battleground stock, and Herb Greenberg for a long time probably wished he never started panning the stock because of its exponential rise.

Making extreme calls on issues in cult stocks, and the "booyah's!" are probably feeling a lot of "Doh's!" this morning. Goldman Sachs has been wrong on this for this some time, and this morning Cramer's call isn't looking that great. Time will tell if Cramer was right or if Goldman Sachs was right, but in the end someone is going to be eating some crow on this duelling call.

Jon C. Ogg
September 14, 2006
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