How About Krispy Kreme?

Today Krispy Kreme exploded higher by 42% after posting better than expected earnings and significantly lowering it's loss per share while reducing debt.

I remember driving to Greensboro, NC with my mother when I was a boy from our small town an hour away to see my orthopedist. We would always pass the Krispy Kreme on Battleground Avenue, and it was my main memory of Greensboro as we only came once a year. At that time there were only two stores, the one in Greensboro and the original store in Winston-Salem. We rarely stopped to buy any, which was a disappointment. Later, when I was in the band in high school, we sold Krispy Kreme doughnuts to raise money for our trips. People rarely refused to buy as the doughnuts were irresistable.

So, it was sad to see such an icon almost completely self-destruct in 2004. I think many people had written it off, but I watched to see how the locals reacted. Almost everyone I know believed in the company and thought it would eventually right itself, contrary to the opinions in the financial media. I missed most of the initial surge after the IPO, so I told myself that if it got under $2 I would buy a 1/4 position. If it showed signs of turning the corner, I would double it. On January 15, I bought the 1/4 position at 1.54. On April 3, the 26ema crossed up the 50ema. On April 6, I doubled my position at 1.93 for an average entry of 1.745. Whether or not I add more will depend on how it behaves going forward, but I will not add any above $5.00 without a clear pattern.

The elliott wave pattern in KKD would allow for an assault on the all time highs, but I don't expect that in a bear market environment, even though it's action in 2001 and 2002 shows that KKD is a bear market stock. My first target is $12 and my second target is $20. Whether or not I sell will depend on the intervening action. I do think that KKD will eventually see new highs, but it may take a few years.

When you have knowledge of a company (legal knowledge), use it. Peter Lynch advised to buy stocks you know.