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Krispy Kreme Doughnuts, Inc. Message Board

  • undervalued_investments undervalued_investments Jun 15, 2006 8:39 PM Flag

    Buy KKD - The long argument

    First time I post in this forum, which I've been following for the past several months. I must confess I finally bought some KKD yesterday in the low $8s - so far I am ahead ;-).

    I trully think this is an obvious turnaround situation, and here is why.

    If you go through the NT 10-Q's and related press releases you will see that as of June 26/05, KKD had total debt of $120 Million, and $42M in cash. Ten months later, after most of the restructuring is over, KKD now has as of 4/30, $121M in debt and $19M in cash. So, they have spent $24M in a successful structuring, which included dealing with a few bankruptcies and closing several stores. I think it is bargain that all of these cost only $24M. moreover, if you look carefully to the last press release this week, looks like the average weekly sales in company stores are coming back in a healthy way, and the company basically broke even for the past quarter (despite interest payments, as well as Cooper, lawyers, and accountants) - this is remarkable! Sure, the franchisee stores are not doing extrenelly well, but the worst must be over for them (the storm for KKD had its peak in 2004 and 2005, the same must be true for the franchisees). Besides, all of the franchisees are still standing, and if they weather the storm so far, chances are they will make it. Looks like KKD has a chance to become profitable once again at the end of next quarter.

    Also, notice that the 10-K released last month had numbers for 2003-2004 that were pretty close to what the company originally said back then. Looks like the rumors of blatant fraud were false. I am confident that when the SEC concludes its investigation, it will find only minor issues, and give minimum penalties to KKD. For sure, the stock will fly then.

    Notice also that the trends from last quarter look very, very positive. Once Cooper and all of the accountants and lawyers leave, KKD will free at least $1.5-2M a MONTH. At this phase, KKD could be able to pay off its debt in 6 years or less!

    I am not saying that this puppy will go back to anywhere near $50, but I believe this stock will at least double within the next 12 months. After that, if the international expansion works, the sky will be the limit. Good luck to all.

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    • Yes, I think I could afford one. As you know, I made $3 bucks on 5000 when I cashed out from $6 to $9 in March. So even if this one goes to ZERO, I'm still up $7k.

      I was referring to your misinterpretation of one of my posts back there, and suggested an easy way to remedy it with a case of COLD brewskis! But don't worry about it. I'm over it. After all, you know I love 'ya Remo, and your little dog too!

      Now I have a suggestion for you- take a profit on those PUTS from $11.80, and "invest" part of it by having a little wing-ding!

    • You "speculate" correctly. I deem buying options a more speculative "investment". I'm not saying it's wrong, only I don't do it. I lost too much money on time decay, only to be right later on. Now I do think writing covered calls comes under investing, as a hedge play, but not the rest. That's speculation, in my lexicon. And don't get me wrong, I don't have any problem with speculating in stocks, bonds, futures, or the price of glow-sticks on July 4th.

      Either way, this is all a matter of personal opinion. My point was that, under my definitions, speculation ruled out the poster short selling, which raised my questions of motivation. (It just seemed like all talk and no action, so I wonder why it's being done. I've seen it on other boards too. There's guy on the ITWO board who's been crapping on them for 5 years, EVERY DAY! And the only reason I can come up with is he personally hates the company, or someone is paying him (shill) to do it, which is no reason to listen to him.)

      What I think you are saying is, the term speculation was being applied to someone that didn't analyze the company a certain way. If so, that's a closed-minded approach. There's fundamental analysis, technical analysis (my preference), astrology, and who knows what else. I'm not going to say that only my way is the best way- I'm saying that my way is the best for me.

      I personally have more respect for someone like my buddy Remo who, while we may have opposing views on the stock, at least puts his money where his mouth is. Heck if he keeps making good trades like his put buy at $11.80, one day I be joining him.

    • Like I said, you guys are all smarter than me.

      True too is the fact that companies can use their stock as currency. So investors that buy the stock on the secondary market provide value to the company by supporting the value of that "currency".

      BTW- Support still looks good at 8 bucks or so, IMO, for anybody that cares to buy this thing. I see a slight rounding saucer here that's got a hint of an upside price bias at this point. The 5-day action is getting quiet, a tight range, which means something's probably going to happen soon. My first bet is back up. But while I still like buying in here, I would not be surprised to see it re-test the 7's. I might buy down there too, if it gets there, depending on how it acts. Upside target for me is $12. Just my humble opinion. Do what you want...

      Best of luck to all who are in it, either way.

    • <So while buying a stock can be deemed either "investing" or "speculation", short selling can only come under the category of speculation.>

      Respectfully disagree, which may go to the heart of your question.

      I am short via puts. That is, I own puts. I also am long other stocks. To me, owning puts in companies you think are overvalued is the same as buying stocks (or calls) on companies you think are undervalued.

      I know the characteristics of the securities you own (options vs. stocks) are different. But in my mind, owning puts, calls, and stocks, and writing options if you have the capital (I don't) is all part of investing.

      To flip your argument, I would assert that buying or selling on technicals is speculating. Only fundamental analsyts truly invest. I "speculate" that you'll disagree!

      FP

    • I could, but then I'd have to... well never mind.

      Is there a case of BECKS there in my future, buddy?

    • "It's not investing in a stock; investing in a stock involves supplying a compnay with capital in some way, via the purchase of its stock or bonds."

      That is only true if you're investing in the original issuance of the shares of stock or bonds to the public.

    • "What part of that don't you understand?" ----I dunno, I guess I'm just not as smart as you guys.

      But to elaborate on the discussion, things have been posted that made me wonder, and that lead to my comments. Take meme for example. I've never read anything about a position, or how to specifically capitalize on all the analysis. Add to that her comment to 'undervalued' (who was buying) that "you're just a speculator", and it makes me wonder.

      Let me explain- I think (I would hope) we could all agree that short selling comes under the category of SPECULATION. (It's not investing in a stock; investing in a stock involves supplying a compnay with capital in some way, via the purchase of its stock or bonds.) I also acknowledge that in addition to short selling, speculation CAN involve buying a stock as well. So while buying a stock can be deemed either "investing" or "speculation", short selling can only come under the category of speculation.

      So if that's the case, and meme clearly showed her disdain for someone who is "just a speculator", then one assumes that meme would never short the stock because then she would be "just a speculator".

      So if she's clearly not long, and would not stoop to speculation by going short, then what's the motivation???

      Hence my comments- why are they doing this? "That's my story, and I'm stickin' to it"

    • Well Thanks!

      And I agree with your logic on the stock 100%. It just makes sense, and there are times when that approach works. I just use technicals though, and at least in this case so far, it's worked for me, buying over time at support levels and building a position. But my long position did look dicey back in late '05.

    • Blue,

      Motivation: Make money. What part of that don't you understand?

      Years ago we were drawn to the stock among all the hype. Yet several posters noted something amiss upon digging into the numbers. They shorted in the 30's and 40's and hung in there on up into the 50's, when the Wall Street Journal first publicly published the various suspicions in the financials and the stock took its first hit.

      The shorts were later vindicated when KKD missed their revenue numbers and the stock dropped into the 20's. Management forced retirements, special committee, etc. all vindicated the short argument.

      Today, that argument continues, simply: KKD will go bankrupt. It has to. Eventually. The business model simply doesn't work and the company cannot support or sustain their debt load.

      That's the simple argument and the simple motivation: making money on a shrewd investment strategy.

      No one has ever said they are working for a big firm with lots of capital. We/they are simply individual investors.

      Again, what part of that simple motive don't you understand?

      Good luck, FP

    • Sorry I can't help you explain what motivates them. I'm sure there's some investment at stake (of course it could be 50.00 to 500,000.00 - there's no way to know). In my case, I just (foolishly) thought that not providing financials when the rest of the companies on the NYSE did would lead to being de-listed or that they'd be out of money by now. So far I've been wrong. But I'm sticking with those thoughts.
      And nice posts by the way!!!

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