Coinstar's Cards for Coins: A Breakthrough for the Company? (CSTR)

I had a two-pronged Peter Lynch style stock epiphany. My wife asks me while passing the local grocery store the other day whether I’d heard that Coinstar (CSTR) has a deal where you can get gift cards to popular stores and avoid the service charge. Surely I’m behind and everyone has known about this for a long time now.

But she says to me that she’s going to cash in my mountain of change and get me an Amazon card. Borders or Starbucks would be fine too since I relinquish money to all of those companies. I see on their Web site that they have several other choices as well, eight in all.

Of course I could cash in my change at any time, suck up the reasonable fee that keeps me from having to have a family night of coin rolling fun, then buy a gift card for myself, someone I love, or give them away as tips.

But there’s something more appealing about getting a gift card or eCertificate in exchange for my ever-accumulating coin collection. For more appealing than grabbing a wad of coinage, shoving it into my pocket, then slapping them down onto counter for the barista to count.

Last night we went down to Denver for a Rockies game. The last in the three game series against San Francisco. We were in cheap outfield seats, but they were at field level directly behind Bonds and had a couple of dingers land close by. On the way down out of the mountains I was noticing, as I have before, how hemmed in by the mountains the towns along the way are; no room to grow. The less flat land on which one of these towns was built on, the less reason for anyone to pull off the interstate that runs straight through the middle of these podunks.

I thought to myself how this is similar to companies that get hedged in by their markets and the limitations of their products and services. For example, the world’s market for yachts is a rather limited one. All markets have a limit, but some are much more finite and predictable than others. But then I wondered are there examples of hemmed in towns that have found ways to overcome their natural restrictions. One of the smallest in the mountains along side I-70 is Dumont, aka exit 235, but it’s also one of the most popular stop offs, especially in the winter with its Starbucks, gas, ski rental, fast food, and Copper Mountain outlet store.

Other towns along the way are far less inviting. By far less, I mean they look as if some mountain man will be waiting, shotgun in hand, for any travelers that happen to accidentally stray off their interstate course. Not far from the truth, this is where you will find the stereotypical societal dropout that reenters society whenever they feel compelled to sound off about this or that antigovernment whatnot.

Not going to lie to you. The mountain towns up here have their fare share of strange characters, especially the ones off the beaten path a bit. Up above Keystone there’s what’s left of an old mining town called Montezuma. There’s only one road in and the same road back out, well technically there are four or five roads out of town, but you’ve got a to have a bigger than stock 4X4 and balls of steel to take some of them. Some routes up and out of there go up and over the Continental Divide and if you don’t have a narrow enough vehicle and very low gears so that you can descend without touching the brakes, you’ll die, no lie. I’ve only driven the easiest of these roads. I want to live.

As you enter Montezuma they have a nice sign over the road letting people know just what kind of place it is. There’s an old bomb hanging from it. The town’s motto is Montezuma: No Rules Above 10,000 Feet. It is a factual creed. The town is above 10,000 feet and rules are noticeably absent. But they’ve got the best fireworks show I’ve ever seen. The rockets blast into the sky for a solid two hours and the reports reverberate off the towering mountains presiding over the lawlessness. I’ve been two years running. I’m told that a few years ago the grand finale consisted of several sticks of TNT. So fitting given the towns mining heritage.

There was a time when Montezuma thrived with hotels, stores, and all the things one would expect to find in such a town of the 1800s. It was then a main route for getting minerals down out of the mountains. That was, until Breckenridge got a railroad. Now Montezuma’s “no rules above 10,000 feet” and Breckenridge is a mini Aspen. Disruptive technology in the 1800s.

The area surrounding Black Hawk and Central City is known as the “Richest square mile on earth” for the concentration and amount of gold found there, still being found in the general area. But I suspect more gold’s being funneled through those towns today than ever before. They're casino towns now. Being hemmed in by the mountains hasn’t stopped Black Hawk from growing. The casino companies have built over top the town’s creek and blasted out chunks of mountain to make more room.

Some towns find ways to un hem themselves. Some don’t. It’s the same for companies.

A couple of years ago Coinstar—the last time I seriously considered the company—seemed to me to be hemmed in by the number of locations it could put machines and and the amount of coinage people would put in those machines. It was making moves, buying other businesses, that seemed desperate for growth to me. I don’t like companies that do that. I think that a company that’s truly maxing out in its market, but that’s making good money, should not be greedy. They should be happy to be making good money and employing lots of people, and they should therefore pay investors good dividends to make up for a lack of growth.

That’s what I thought about Coinstar, until I learned about this relatively new card program. Now I believe Coinstar has found a way to un-hem itself. There’s still a finite amount of loose coinage laying around, but the company’s likely to get a greater percentage of that coinage. It opens up a whole new set of possibilities, for example, I could see the company working deals to spit out lotto tickets for coins. And they ought to be offering grocery cards in the stores they have their machines, if they can get the stores to go along with it. I know it’s not very logical, but I think I’m a lot more likely to toss my coins into their machine if I can get a card for some free coffee or a free book.