The details of my Big Bet against Krispy Kreme

[Groty]

"You can have Jesus come on CNBC and tell everyone that GE is trading for 20% of it's intrinsic value,..."

Am I the only one who thought Jesus uses TA for his investment decisions?

[DesertCat]

[ QUOTE ]
"You can have Jesus come on CNBC and tell everyone that GE is trading for 20% of it's intrinsic value,..."

Am I the only one who thought Jesus uses TA for his investment decisions?

[/ QUOTE ]

Jesus was a fisherman. That makes him a value investor for sure

[leto333]

One minor point, John Henry's fund does not predict price, they are long term trend followers, meaning they enter positions after they have determined a possible trend has begun and then ride the trend as long as it lasts, while cutting losses if the trade goes against them. The fund draw downs are not due to individual positions going against them, but from getting stopped out for small loses repeatedly. Thier winning percentage is quite small compared to a value investor, but the magnitude of thier wins are quite large.

[leto333]

Well, this thread makes pretty fascinating reading, as your fundamental analysis appears impeccable, and yet the issue still moved against your position until the larger market trends reversed as is common in the summer months.

The thread reminds me of the story in Reminiscences of a Stock Operator where he joined up with a fundamental cotton trader who kept giving him all the reasons for cotton to go up, so he kept averaging down and down, until he had nothing left.

this of course is not the case with you as your post stating it is only 5% of your port makes this a perfectly legitimate speculative trade in a risk/reward sense.

I am curious, did the anticipation of the slow summer months in the markets play any part in your timing, or was it all based on your read of the fundamentals?

[DesertCat]

[ QUOTE ]

I am curious, did the anticipation of the slow summer months in the markets play any part in your timing, or was it all based on your read of the fundamentals?

[/ QUOTE ]

All fundamentals. I ignore timing. Though KKD apparently has slower sales in summer, so any increased cash burn this summer could be what provokes a liquidity crisis. But if it happens it's purely luck of timing for me.

[KaneKungFu123]

http://albuquerque.bizjournals.com/a...html?from_yf=1

"In a news release, Winston-Salem, N.C.-based Krispy Kreme (NYSE: KKD) said it had revenues of about $116 million during the first quarter of its 2007 fiscal year, which ended April 30. That's 24 percent less than the $153 million in revenues the company had a year earlier."

"Krispy Kreme also said that it believes it will have enough cash to operate. The company said that as of April 30 it had $19 million in cash and debt of $121 million."

They also announced more overseas franchises in Japan.

[DesertCat]

The financial info is what they released last month. THe overseas franchises aren't going to help much in the short run, because they'll only start with one or two stores at a time, and it will take years before foreign franchise fees become sigificant. They probably won't be able to sell supplies to the foreign stores, so it's really just the 6% of sales they get from franchise fees.

This weekend three stores closed (in tampa I believe) so they are still shrinking in the U.S. And U.S. stores are each probably twice as important as international stores, since they get franchise fees plus supplies profits from the domestics.

[chopstick]

I just read the release from a month ago.

"Krispy Kreme Doughnuts, (NYSE: KKD) announced it is unable to file timely a quarterly report on Form 10-Q for the quarter ended April 30, 2006 (the first quarter of fiscal 2007) because the Company devoted substantial resources to completing its annual report on Form 10-K for fiscal 2005, which was filed on April 28, 2006."


'devoted substantial resources', eh? That is sounding very much like the-dog-ate-my-homework. Or more appropriately "we tried our best".

Someone needs to call up Sean Connery and have him deliver his "losers always whine about doing their best" speech to KKD. I don't think KKD is going home with the Prom Queen.



Here's another short discussion of why KKD hasn't been delisted for their terrible accounting practices - exchange rules.

[hawk59]

[ QUOTE ]
I just read the release from a month ago.

"Krispy Kreme Doughnuts, (NYSE: KKD) announced it is unable to file timely a quarterly report on Form 10-Q for the quarter ended April 30, 2006 (the first quarter of fiscal 2007) because the Company devoted substantial resources to completing its annual report on Form 10-K for fiscal 2005, which was filed on April 28, 2006."


'devoted substantial resources', eh? That is sounding very much like the-dog-ate-my-homework. Or more appropriately "we tried our best".

Someone needs to call up Sean Connery and have him deliver his "losers always whine about doing their best" speech to KKD. I don't think KKD is going home with the Prom Queen.



Here's another short discussion of why KKD hasn't been delisted for their terrible accounting practices - exchange rules.

[/ QUOTE ]

lots of companies have been delaying their 10-k's and 10-q's since sarbanes-oxley, it's been a common occurence.

[jjp]

I've been a KKD hater for a while now (loved the donuts, hated the stock price), and thanks to your thread, jumped on the KKD put option bandwagon.

So I have the $10 January 07 puts that I bought at $1.85 and are now trading at $3.20, with a $0.46 time premium for the 6 months until expiration.

When do you think I should take the profits? Should we expect any significant news in the next 3 months?