This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Cult Stocks: Krispy Kreme's Sweet Comeback

Stocks in this article: KKD

This post appeared earlier Thursday on RealMoney . Click here for a free trial, and enjoy incisive commentary all day, every day.

When the call went out for a special feature on cult stocks, I was the RealMoney contributor who asked, "What the heck is a cult stock?" A little slow on the uptake sometimes, I am. My first thought, on finding out what it was, was that no company says "cult stock" more than Harley Davidson (HOG - Get Report). After all, have you ever known anyone to tattoo "McDonald's (MCD - Get Report)", "Pfizer (PFE - Get Report)", or "Microsoft (MSFT - Get Report)" on a body part? Maybe you have. But, in any case, I don't want to write about motorcycles today, not when I can write about doughnuts.

And not just any doughnuts. Krispy Kreme Doughnuts (KKD - Get Report) -- a cult classic that some folks evidently even use as hamburger buns. Really. Great doughnuts, however, don't necessarily translate into a great stock. The company went public back in 2000 at $21 per share ($5.50 split adjusted) amid much fanfare, opened at $32 and rose to $37 ($9.25 split adjusted) on the first day of trading. By December of 2001, the share price had quadrupled. After topping out in December of 2003 in the $49 range, it's been pretty much all downhill since, and this former high flyer now trades around $4.00, a veritable reverse ten bagger.

Name a bad business development, and it probably happened to Krispy Kreme. Over-expansion, ridiculous over-payment to acquire stores from franchisees, poor accounting practices and controls, restatements, bad management, class-action lawsuits, declining sales and disappearing profits ... the list goes on. The losses piled up, year after year until, all but forgotten, the stock bottomed at $1.08 in February of 2009, a shadow of its former self. Talk about the near destruction of a brand; If this is not already a business-school case study, it should be.

This stock went from growth darling to near oblivion. I, for one, had forgotten about it. Krispy Kreme's presence in the area I live all but disappeared, as the company closed stores and ended relationships with supermarket chains that carried the company's product.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs