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In December 2019, Dutch beverage company Jacobs Douwe Egberts bought U.S.-based specialty coffee company Peet’s Coffee, setting the stage for one of 2020’s most anticipated IPOs: JDE Peet’s.
JDE Peet’s bills itself as the world’s largest pure-play coffee and tea company (“pure play” refers to a company that operates specifically around one line of business). The company says it served 130 billion cups of coffee and tea in more than 100 countries in 2019. Thanks to the merger, JDE Peet’s will be present in more than 140 countries and is expected to drive revenues of approximately 7 billion euros ($7.86 billion, at the current exchange rate).
And as of May 29, investors can add Peet’s to their portfolio; the company is listed on European stock exchange Euronext. Read on to learn how to buy Peet’s stock in four steps.
» Need a brokerage account? Learn how to open one to buy Peet's stock.
1. Research Peet’s financials and background
Companies that go public are required to publicly file loads of financial paperwork so potential investors can determine if they are a sound investment. In the U.S., this information lives in the company’s Form S-1 filing with the Securities and Exchange Commission. The form highlights revenue and profits, how the company will use the money it raises in an IPO and potential risk factors.
For JDE Peet’s European IPO, investors will want to look to the company’s prospectus, which outlines what it perceives as its strengths as well as potential risks:
Growing revenue. Between its fiscal years 2017 and 2019, JDE Peet’s increased its revenue at a compound annual growth rate of 3.1%, all while successfully increasing free cash flow each year.
A strong and resilient market. The global coffee and tea market grew by a CAGR of 2.9% in volume from 2007 to 2019, according to JDE Peet’s prospectus.
Large portfolio. More than 50 coffee and tea brands live under the JDE Peet’s umbrella, which the company says is the largest such portfolio in the world.
Heavy competition. The coffee and tea industry is already home to a number of successful global players. If JDE Peet’s fails to compete, it could impact profitability and revenue.
How the brands are perceived. The company can create innovative and inspired products, but if they don’t resonate with consumers, they might not make a lasting impression.
The cost of raw materials. The price of “green coffee,” or raw coffee beans, can fluctuate unexpectedly, which could affect gross margin and profit.
These are just a small handful of the risks outlined in the prospectus, showcasing why it’s so important to dig into a company’s IPO documents before investing.
2. Decide how Peet's will fit into your portfolio
At NerdWallet, we believe low-cost index funds should form the bedrock of an investor’s portfolio. These investment products seek to mirror the performance of broader market indexes, offering more diversification than investing in individual stocks. However, it may make sense to allocate a small portion of your portfolio — generally 10% or less — to individual stocks such as Peet’s.
Before investing in Peet’s, think about how it will fit in with your current portfolio and investment goals. Consider the following:
As a rule of thumb, don’t invest any money you may need to access in the next five years. We view investing as a long-term wealth strategy, not a quick way to make a buck.
What’s already in your portfolio? Diversification is key to limiting risk. If you’ve already invested in other food and beverage companies (either individually or through a mutual fund), ask yourself if your portfolio would be more diversified by investing in a company that operates in a different sector or industry.
What’s your risk tolerance? Investing in individual stocks comes with inherent risk, and that goes doubly for newly listed companies without a long performance history to scrutinize. Not every investor can stomach the ups and downs of investing in individual stocks.
3. Open a brokerage account
You’ll need a brokerage account to buy Peet’s stock, but fortunately, it’s not as complicated as it might seem. If you’ve opened a bank account, you can open a brokerage account.
There are many online brokerages to choose from, but you can whittle down your search by looking for only those with low account minimums, free commissions on trades and an easy-to-use online platform. Since you’re after Peet’s stock, you’ll also want to be mindful of the company's European exchange listing. Be sure to choose a brokerage that offers trading directly on foreign exchanges.
Considering all this, here’s a shortlist of our picks for the best brokers:
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4. Buy Peet's stock
Once you’ve looked through Peet’s financials, considered the stock in the context of your portfolio and opened a brokerage account, it’s time to buy. But with an international company like JDE Peet’s, there are a few additional considerations compared to buying a stock that’s listed on U.S. exchanges like the NYSE or Nasdaq.
A common way to invest in international stocks is to purchase American depositary receipts on a U.S. stock exchange. ADRs represent a specific number of shares of a foreign company’s stock and are issued by U.S. banks or brokers.
However, when ADRs aren’t available — as is currently the case with Peet's — investors have limited options for trading international stocks. At some brokerages, you may be able to invest directly in international stocks after updating a few settings in your account. Others allow trades only through the over-the-counter market, which comes with its own set of risks and fees.
Check with your broker to determine if either of the above options is available to you. If the brokerage allows direct investment in foreign exchanges, be sure to confirm how to search its ticker symbol, as this could differ from brokerage to brokerage. Fidelity, for example, requires a colon followed by the initials of the country in which the stock is traded. In this case, that's JDEP:NL.
Keep in mind that at most brokerages, investing in international stocks will come with trading commissions, which you won’t typically pay when trading on U.S. exchanges. If you’re hoping to gain exposure to international stocks and you’re not as concerned with buying a specific stock like JDE Peet’s, also consider international mutual funds, which provide the diversification of international stocks without the additional risks and fees.
» Need a bit more info? Learn how to buy stocks.