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Green Mountain surges. But why?

August 2, 2012: 10:41 AM ET

Green Mountain Coffee Roasters (GMCR) issued some decaf guidance. But that didn't matter to investors. Shares popped nearly 30% Thursday morning even though the company provided a near-term earnings outlook Wednesday that was less than stellar. It appears investors are excited to hear that the company is boosting its inventory ahead of what it hopes will be strong demand next year.

That's dangerous. Many companies have been burned by boosting inventory in anticipation of demand that doesn't materialize. The big move up in Green Mountain looks a lot like a classic short squeeze to me. It appears that a similar squeeze is taking place with First Solar (FSLR) Thursdeay morning. But short covering may only provide a temporary jolt to the stock. Keep in mind that David Einhorn and many other shorts have been targeting Green Mountain with good reason.

Investors should probably wake up and smell the coffee. Starbucks (SBUX) remains as much a fierce competitor to Green Mountain as much as it is a K-Cup partner. What's more, recent earnings from Stabucks and Dunkin' Brands (DNKN) were about as appetizing as a stale cup of Sanka. For more on Green Mountain, check out today's Buzz video below.

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Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

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