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Wednesday, March 18, 2015
THE STOCK TIP
THE STOCK TIP
I just saw an article about Krispy Kreme introducing a new doughnut. It is a hotdog with bacon and raspberry jam in a sugar coated Krispy Kreme doughnut roll. Sounds gross to me, but the article goes on to say that the Krispy Kreme Company needs to do something to stop their slipping sales and falling stock price. It reminded me of the first time I ever heard of Krispy Kreme.
Years ago we were vacationing with friends in Myrtle Beach, South Carolina. Our friends were from South Carolina. While driving down the main drag of Myrtle Beach, my friend did a sudden full speed U-turn in the middle of the road to shift from south bound to north bound, a maneuver I had only previously seen in TV cop shows.
There may have been some herbs involved. OK, Mrs. Dude was on chemo and the herbs were for her…we probably shared some of her medication.
“Light’s on man!”
“Light’s on at Krispy Kreme, that means they just pulled out a fresh batch of doughnuts.”
That is the first ever heard of Krispy Kreme.
We ordered a dozen. I had a lemon filled sugar coated doughnut, and by “a” I mean three. Fresh out of the oven, it was the best friggin doughnut I have ever tasted before or since.
At the time, Krispy Kreme was only found in the south, and it was privately owned.
About two years later, I learned that Krispy Kreme was going public and it was going to open stores all over the country.
The stock came out at about $10 a share. I had just received my Christmas bonus and actually had enough left over after paying bills to invest as much as $1000.
I thought any company that could make a normally sane, albeit possibly a bit toasted, person risk his life with a flying U-turn through traffic just to get an oven fresh doughnut, had to be a company worth investing in.
I called my broker to put in an order.
“Doughnuts!” He said, “You don’t want to invest in doughnuts, video rentals, that’s where the money is.”
I took his advice and bought some Blockbuster Video. He was right about a previous investment idea, and talked me out of purchasing Priceline.com. I was going to buy it at ten cents a share and he told me to steer clear. It did fall to eight cents a share, so he knew stuff.
I haven’t seen a Blockbuster Video store for a while.
Krispy Kreme was an initial success and in the first couple of years split several times and went to fifty bucks a share. My thousand dollar investment would have gone to about fifty thousand dollars. Realistically I probably would have bailed out at ten thousand dollars but…
Krispy Kreme did fall on hard times, due to management, not the product. They still make the best doughnuts ever, especially if you get them right out of the oven.
Is there a moral to this?
I guess it is when investing it is often good to go with your instincts and invest in a product that you really like.
However, when they have to resort to adding bacon to their product you probably ought to sell.