Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mu Gamma Lambda -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (586)	6/14/2001 12:38:36 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 10077

from thestreet.com... Given its extreme valuation and fad status, many investors have shorted Krispy Kreme, selling stock they have borrowed in hopes of buying it back at a lower price and keeping the difference. Although short interest had fallen to 5.9 million shares by mid-May from 6.4 million in mid-April, it is still very hard to borrow the stock, according to several traders. Even if you want to short this stock, you will have a difficult time doing it. Not that shorting Krispy Kreme -- despite its cult status and its heady valuation -- is necessarily such a good idea. "This is the quintessential example of a stock I would never short," says Bill Fleckenstein, president of Fleckenstein Capital and a noted short-seller. "I don't short stocks just because they're overvalued. I particularly stay away from stocks that are crowded [with shorts] like this one. I've seen this movie too many times before." An overvalued and overloved stock can always get more overvalued, more overloved. As its shares run higher, anyone who has gone short has to worry about losing money. Some will cave in, rushing to buy back the stock they have borrowed, and in so doing sending the price ever higher. If short interest is high, a short-covering can send a stock appreciably higher. That's something like what's already happened with Krispy Kreme. Much of its big jump has been the result of rolling short-covering -- some people throwing in the towel and buying back the shares they borrowed, others borrowing those shares as they come back on the market, and so on. "The amount of people that lost money trading this stock," says Gruntal director of equity trading Sam Ginzburg, "could fill Giants stadium." His advice to those who would get involved with Krispy Kreme, on either the long or the short side: "Don't do it. Don't trade this stock. Leave it alone. Give your money to charity." I think you're right though, this time it's different. :)