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Why You Must Sell Green Mountain Coffee

Thursday, 30 Sep 2010 | 9:12 PM ET

Accounting irregularities equal sell, Cramer said Thursday. It’s one of his golden rules. Doesn’t matter how seemingly small the error, you must dump any company with mistakes on its books.

Cramer's Sell Block
Cramer tells you which stocks you ought to be selling right now, either to take profits or to cut your losses.

That means Green Mountain Coffee Roasters , even though its business has been strong and its stock is near a 52-week high, must be sold.

You probably know Green Mountain and its single-cup Keurig coffeemaker and accompanying K-cup pods to go with it. Well, on top of the Securities and Exchange Commission inquiry launched Tuesday, the details of which are not yet know by even the company, we also heard that GMCR disclosed a $4.4 million accounting error.

“Apparently the company had been overstating its consolidated inventory and understating its cost of sales by a tiny amount for the last four years,” Cramer said. “Over that period of time these mistakes led Green Mountain to overstate its earnings per share by 3 cents.”

Maybe that number sees insignificant to the average investor, but to Cramer it doesn’t matter. Accounting irregularities are “the kiss of death for a stock,” he said. So GMCR has to go “until the errors are addressed and the SEC is completely satisfied.”

Call Cramer: 1-800-743-CNBC

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