There's one more bounce for Krispy Kreme, then it's over

In 2003 Krispy Kreme Doughnuts  (Public, NYSE:KKD) was the stock to own and at $40+ a share it seem like a good deal.  Three years later and their stock is down 92% since October 2003, their doughnuts sell for more than one share of KKD.  Krispy could be considered a penny stock at this point and we think they've got one more run before it's all over.

As of last month 19.8% of KKD's float was short and for good reason.  There's been a decent amount of insider buying these last 6 months that occurred over the summer when shares were in the $8 to $9 range. Now that shares are trying to stay above $3.50 you just have to ask yourself - why would these executives waste their money on a horrible investment?

Morgan Stanley (NYSE:MS) now owns just 1,074 KKD shares, down from roughly 3.3 million in February.  Clearly Morgan is not as optimistic as some Krispy board members but they also have their own shareholders to worry about.  The bigger issue is how much longer can Krispy burn through their remaining cash, more like their credit cards.  Krispy Kreme has worse credit than most loan sharks and their net income is scary for a company with a $209 million market cap.  In 2006 Krispy Kreme's net income was -$135 million and for 2007 as of July they are running at -$42 million.  Stick a fork in this company because the doughnut is beyond deep fried, it's burnt to a crisp.

For long-term shareholders (if there are any out there) there is no worse pain than to take a look at the 5 year chart on this company:

It's bad.  So why write about this burnt out stock and company?  Because fellow Masters, it's Krispy Kreme and their brand is worth millions to a would-be buyer.

It's time to sell Krispy Kreme Doughnuts (NYSE:KKD) or let it die a Pink Sheet death trading Over-the-Counter in the next few months.  Fire the management, clean house, re-org, and for the love of your Original Glazed doughnut, just do something.

Sell out to Carl Icahn or maybe Bill Gates will buy you and give your doughnuts to starving people all over the world. Some group is going to do something to get the last rally out of Krispy Kreme shares, you can smell it in the air.  I would never tell anyone in their right mind to buy this stock, but now that it is almost near a new 52-week low, there will be some action.  It always happens.  Wrong or right, the traders on Wall Street will squeeze the last penny out of Krispy Kreme before they leave it to die without a kiss good-bye.  I plan to watch the activity on KKD shares because I believe one last lap is coming -- then it's all over.