| Krispy Kreme Doughnuts (KKD) : Doughnut maker's shares have received two downgrades this week: one from brokerage firm Dain Rauscher Wessels and the other by CEO Scott Livengood. The former lowered its rating on the stock this morning to Buy-Aggressive from Strong Buy, citing the significant price appreciation the stock has experienced since firm's February upgrade. The latter has undercut the all-important KKD momentum by filing to sell several million dollars worth of company stock. According to Securities and Exchange Commission (SEC) documents, Mr. Livengood intends to sell up to 80,000 shares of KKD stock... Subsequent share price consolidation is providing short-sellers a much-needed reprieve from the ongoing short-squeeze that has propelled KKD more than 140% over the past six months. Difficult to find consistent data on just how many shares of KKD stock have been sold short, but most sources indicate a figure no less than 30% of the company's float, or about 10-12x the level we would consider normal... Mr. Livengood has been Krispy Kreme's most visible cheerleader, himself a buyer of KKD shares in the open market in April. More important, investors/traders have viewed Mr. Livengood as a CEO who is just as a astute managing the stock price as he is the company, consistently delivering the one-two punch of upside earnings surprises and positive forward guidance. The CEO's penchant for declaring 2-for-1 stock splits has also been viewed by KKD holders as one his more positive attributes... Mr. Livengood's decision to take some money off the table is providing KKD holders an excuse to cash in some of their KKD profits. But given the nature of momentum investing, short-term profit-taking by investors could potentially trigger a price implosion in the stock price... For the next several weeks, could very well see KKD longs in the unusual position of being on the defensive. The next potential catalyst for the stock is the company's August earnings report, which is likely to provide another of the aforementioned one-two combination punches (upside earnings, positive guidance) that has kept short-sellers on the ropes. -- Damon Southward, Briefing.com |
