Jones Soda (JSDA)

[Chart Addict]

Overpriced is in the eye of the beholder. Here is a tale of two charts with more in common than one may imagine.

The first is the subject of this forum, Jones Soda (JSDA), while the other is of one of the company's direct competitors, Cott Corp. (COT). COT's description reads, in part, "Cott Corporation, together with its subsidiaries, produces and sells beverages on behalf of retailers, brand owners, and distributors worldwide." Its product lines are more diverse than JSDA's, and include carbonated soft drinks, juice and juice-based products, clear and flavored waters, and other such things.

JSDA doesn't quite have as long a history as a company when compared with Cott, but what we're looking at here are the areas of their charts that overlap in time. Both may be distinguished by peaks in excess of $30 per share within a few points of one another at their most recent peaks. These peaks were followed by simultaneous and precipitous declines. Both were selling for pennies on the dollar during precicely the same period of time. Here's what this looks like historically:





Traders eventually got over their state of disbelief, and realized that the sky was not falling so much as a good strong freeze had set in and that the proverbial money trees were replete with low hanging fruit. Once they figured that out, COT shot up like a rocket (as did hundreds of other stocks around that same time) and Jones followed suit.

ANALYSIS

How do we account for these two companies being priced in the low $30s at one point in time, and as pocket change some time later? (There were no stock splits in either stock during this period.) The end of week closing prices for these and some other beverage-related stocks may provide some insight. COT closed out the week at $14.52; JSDA at $0.645; Monster Beverage (MNST) - itself once a penny stock - closed at $150.51, while Coca Cola Bottling Co. (COKE) came in on the NASDAQ at $126.96, while Coca-Cola Company (KA) closed at $44.78 on the NYSE.

How are stock prices truly derived? By some magical formula involving the inverse relationship between the P/E, the debt ratio multiplied by the Fibonacci relationship between two triangularly weighted moving averages less the difference between the percentage of institutional vs insider shareholders on an annualized basis? Absolutely, and by using the difference between the Zack's ranking and the Motley Fool community rating, one can project three to four months into the future to see just where the price will land.

Would that it were truly that simple. In the final analysis, maybe Jones Soda is a tad pricey at $1.79 a bottle, but then prices are also generally higher in convenience stores. Consumers know that they are paying a premium for the convenience of not going to the supermarket across town. And, while we've been told time and again that we are fools to pay for bottled water that's no better than that which pours freely from the faucets of many American cities (which is to say, it ain't altogether that great), some conglomerates nevertheless have been raking in a fortune on the public's perception that bottled water is better than that which is to be found in the company's own water cooler, even if it is serving up the same brand! On some level, consumers know they are being duped, and they seem to enjoy it. Or, perhaps it is that they have simply become so accustomed to being fleeced on a daily basis that they don't even think about it any more.

The bottom line is that anything is worth exactly what people are willing to pay for it. No more, and no less, at least on any one particular day. As for the merits of the 7-11 deal, with that many stores, and the fact that the product is placed where people not only have to see it as they look around the store as they stand in line to pay, but its also within their reach as a last minute impulse purchase. That's a pretty strong beverage play, I dare say.