I stumbled onto KKD in early 2010. While busted cult stocks are not typically in value investors playbooks, this one caught my eye. After several money-losing years, the company broke even for 2010, and it appeared as though it had cleaned up its act.
Stores had closed over the years, debt had been paid down, and the company was expanding again. But this time, a lot of the growth was international. While not the classic value story, I saw great value in the brand name itself wrapped in a package with a small $300 million market cap, and took a position. After three consecutive years of profitability, other investors are beginning to embrace KKD as well. While there was not much good news in the markets this past Friday, KKD shares were a bright spot, rising more than 21% to $17.32, on eight times normal average volume.
The company put up better-than-expected first-quarter numbers after market close on Thursday, beating on revenue ($120.6 million vs. expecations for $117 million) and earnings (20 cents vs. 16 cents). Revenue rose a solid 11.2%, and this represented the 18th consecutive increase in same-store sales at company-owned stores.