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Krispy Kreme Doughnuts, Inc. Message Board

  • frankthedudegomez frankthedudegomez Mar 1, 2004 2:56 PM Flag

    Very obvious

    this car is out of gas. down we go.

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    • Good post and historically you're correct. If you bought KKD in the 30's and sold in the 40's (not necessarily in that order) you would have made money. The obvious question is, will that trend continue? Investors shorting or buying puts today are betting it won't.

      Again, revenue growth has come from purchases of franchisees. These transactions have been presumably made with stock, although the company hasn't yet disclosed the latest Northern California financial details, including valuation methodology. Past deals showed management's willingness to trade stock for revenues at questionable valuations.

      Past deals DO indeed matter, because they give investors insight into management's credibility and willingness to do similar deals in the future.

      I don't dispute your technical analysis, but I am fundamental. There are way too many questions about the quality of revenues and earnings to justify holding this stock.

      The insiders keep selling. I'm with them.

    • I'm not use to seeing common sense like this on this board:
      Re: Volvo Driver
      by: technicalnarcissist (48/M)
      Long-Term Sentiment: Buy 03/02/04 02:19 pm
      Msg: 85713 of 85718

      ...Just making the point that BRAND + PERFORMANCE = new stock price highs. And KKD still has far as I'm concerned, if you have to invest in a stock, KKD is a buy anywhere in the 30's.

    • You've got some imagination there.

    • Well isn't that nice. Let me know when your crystal ball changes. Till then I am back in my foxhole. I use the UYA trend line and it seems to indicate a complete collapse to high teens. check it out.
      On another note, this whole atkins thing doesnt seem to have affected companies like K. I wonder why. I dont know anyone that is buying cereal these days. Go look in your grocery store, its falling into the aisles.I am not short K, but did sell a long term long pos a few weeks back thinking that Atkins would hurt them. Oh well, its dark down here.

    • A final thought from me on this thread. Stocks seldom drift higher, and KKD has made a nice move of almost 15% from what I believe was its bottom, with some conviction as the up days are the highest volume days......I agree it could stagger some here with the earnings info prereleased and the 100 and 200 MA just overhead. But as of now, KKD is under accumulation and a penetration of 40 will lead to a move to 43-44 or so. I am long with a relatively tight stop under my buy which I adjusted after I bought. My purchase of KKD was a mistake, as I was using a new TA analysis program and ended up using EMA's (which showed some great buy signals along with the developing uptrend) as opposed to SMA's (which I consider more valid since that is what most technicians use). So forgive me if I cheer it on a bit, I honestly believe KKD is a great issue and I need a little boost here to be removed safely from my rather tight stop.........................TN

    • "Very well said."

      You mean you are actually admitting that his post is better than the one you admonished yesterday from Senor Gomez who stated: "This car has run out of gas. Down we go?"

      What would Mr. Gomez think now?

    • Very well said. Between your post and sharkfest, there is a case to be made for the longs. I agree that stocks are for trading. Right now, the earnings have been announced and the conference call has been scheduled. Shouldn't the price be drifting higher rather than lower? I feel a little more comfortable sitting on the sidelines when the momentum is with the sellers. I would be very happy to move back in when the winds have shifted more positively.

    • After a stock hits new highs and the trend starts down, people begin to jump on the short bandwagon and try to find ways to disparage the company and accelerate the downward price movement......I've seen it time and time again. Fear of course will drive some investors out of the stock and help the shorts' cause. KKD was a great short play at JOSB was at 50 (before it split)......but the fundamentally sound companies always come back. A shady deal or two? Maybe. Who cares. Long term, this one's a winner that's in a basing period right now, that's all, and it's being slammed like all the winners that get caught in a downtrend, usually by hopeful shorts or disappointed longs who made the wrong move. As for me, I really don't care, stocks are for trading, not owning. Morgan silver dollars and real estate are for owning. Just making the point that BRAND + PERFORMANCE = new stock price highs. And KKD still has far as I'm concerned, if you have to invest in a stock, KKD is a buy anywhere in the 30's.

    • Nice consolidated synopsis of the issues.

    • Thank you for this post outlining the long position. I agree that one (unquantifiable) thing KKD has going for it is its brand, and the "cache" Volvo Driver spoke of. Bringing KKD's to the office is "special" but Duncan Donuts is much. KKD PR machine has done a great job hyping new stores with givaways and other gimmicks.

      I think the reasonable short response goes something like this: New stores have big, frenzied openings, then in time, the novelty wears off. KKD's same store sales use unusual time periods which appear to dampen this effect and may give a false read on sustainability.

      Revenue drivers: It's not just donut sales. Revenues include machinery and startup items to new stores, as well as newly recognized revenues from franchise buybacks - buybacks is stock which costs shareholders. So revenue growth is largely coming at the expense of shareholder interest, it appears.

      (Also KKD doesn't show what happens to unsold wholesale donuts at grocery stores. Are they netted against revenues or expensed?)

      Growth has to be financed. Cursory analysis of cash flows shows that new stores (cap ex) are being financed entirely out of cash from finance, meaning new shares (used to buy back franchises) and new debt. Free cash flow is increasingly negative. If they can't finance new stores out of cash from operations, and if they have trouble raising debt (like the last bank refi), what happens? Keep issuing new stock?

      Why are all the insiders selling off their ownership? Why is it that not a single insider agrees with long shareholders? Doesn't that fact bother any longs out there?

      EPS growth: How does KKD treat costs associated with new stores? Are they expensed, which would hurt eps, or capitalized? If stores are so profitable, why are franchisees so eager to sell out to KKD Inc.?

      Why is goodwill increasing so dramatically on the balance sheet? Overpaying for franchises? If they're not overpaying, where is the growth in free cash flow?

      Let me pose the alternate conclusion to your observations regarding growth: This is a fad.

      McD's was not a fad, it spawned an industry, as did Coke. Huge brands, worldwide recognition. Is KKD starting an industry? Are they trying to compete with SBX? Are they a wholesale bakery? a donut theatre experience? a coffee house? What are they, exactly?

      It doesn't take much digging under the surface of this company to find reasonable issues that would give stockholders concern.

      PS Wish me a happy birthday. Lordy lordy...

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