"One of the guiding principles of our growth investing system is the concept that major trends tend to persist longer and go farther than originally expected," says Timothy Lutts.

In The Cabot Stock of the Month, he adds, "It’s a principle that supports our current bullish market stance and our recommendation of Green Mountain Coffee Roasters (NASDAQ: GMCR), even though the stock is already up more than four-fold since March."

"The business, of course, is coffee, a true global mass-market product. Starbucks became a huge success in the out of-home coffee business over the past two decades; it now has more than 16,000 stores in 49 countries, and annual revenues of $10 billion.

"But Starbucks’ stock peaked in 2006 (ending a 14-year run), its earnings peaked in 2007, and for the past three quarters Starbucks has suffered from shrinking revenues. Today, its stock is 50% off that old high.

"But Green Mountain Coffee Roasters is younger and far less famous. Its revenues are less than one-tenth of Starbucks’. Its earnings are still growing rapidly, actually accelerating—a characteristic of many great growth companies.

"And its stock is hitting new highs, as more and more investors come to recognize the growth potential of this company and climb on board.

"The main difference between the two companies is that Green Mountain has no coffee shops. Its coffee is sold in supermarkets, club stores and directly to consumers and businesses. In the second quarter, revenues grew 61% from the year before.

"And the biggest reason for this growth is the company’s Keurig Single-Cup Brewing System, which is leading a revolution in the way consumers prepare their coffee.

"If you’ve used one, you know how easy it is. Consumers can now get a perfectly brewed cup of coffee in less than a minute, at home or at the offi ce, and at a cost of less than 50 cents.

"At the heart of the Keurig system are the individual K-cups, single-portion packs that are available in hundreds of varieties from over a dozen coffee brands, including Diedrich, Gloria Jean’s, Timothy’s, Van Houtte, Tully’s, Newman’s Own and Emeril.

"There’s also tea and herbal drinks, from the likes of Celestial Seasonings, Bigelow and Twinings, and hot cocoa from Ghirardelli.

"And the greatest part of this single-serving business model, from an investor’s point of view, is the recurring income. Years ago, Gillette made a killing in razor blades. Kodak cleaned up in the photography film business. And now Green Mountain is raking in the money.

"The firm makes six cents for each K-Cup sold by its licensees, and even more profit when its own coffee is purchased, at an accelerating rate. The firm sold 400,000 Keurig brewers in the last quarter alone, and we expect them to be hot gift items in the upcoming holiday season.

"The chart of GMCR looks terrific. After falling from 30 to 15 in the bear market, it quickly regained its old level and then broke out to new highs in March, just two weeks after the market bottom.

"The end of April saw a big gap up on earnings news, and the stock has been trending higher since, fueled by growing interest among individual and institutional investors. The 25-and 50-day moving averages are down near 65, so that would be a great entry point. We’ll play it simple by getting on board now."