Tony C, RE: When the P/E is 120 on a food stock, you can't expect it to go THAT much higher, and it has a long way to fall once the momentum traders abandon it (as they will as they do every stock when it stalls out after a meteoric rise).
Bottom line, just because a stock is expensive doesn't mean that it can get really, really overvalued, and just because a stock is really, really overvalued doesn't mean it can't get downright absurd.
As long as the fundamental story at KKD remains intact (and it still does remain intact), you have to depend to a certain degree upon luck to make money on a short sale. One big reason why KKD has continued to defy gravity over the past month is because the market in general has done so well. Add to that the fact that KKD reported its traditional better-than-expected earnings and you have a recipe for an absurdly priced stock.
Make no mistake, KKD is absurdly priced. Most likely, 5 years from now the stock price won't be too different from today, and that is making the assumption that the company does all the right things.
Consistently successful short selling requires two things--overvaluation and deteriorating fundmentals. One of those is still missing in KKD. |
