RE: [CANSLIM] Opinions on KKD?

From: "Cefaloni, John L Jr. [AMSTA-AR-WEA]" <cefaloni@pica.army.mil>
Subject: RE: [CANSLIM] Opinions on KKD?
Date: Fri, 11 Jan 2002 11:30:27 -0500

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Howard,

Thanks for the detailed assessment - it is very helpful.  Can I ask why you
don't think it's a CANSLIM stock?  The growth that you point out should
qualify it.  In fact, the C, A, N, S, L, and I all seem to be in order.  The
M may be arguable.  It has also based from June to November, but is now
close to the high.

I understand that valuation is a problem, but my recollection is that
valuation is not a significant factor in the CANSLIM equation.

What am I missing?

John C.

- -----Original Message-----
From: Mhboatman@aol.com [mailto:Mhboatman@aol.com]
Sent: Friday, January 11, 2002 11:11 AM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] Opinions on KKD?


John C.

Not a CANSLIM stock in my opinion -- at least not at the moment.  

However, I see it as a stock with substantial growth potential.  A big neg. 
for some might be it 108 PE.  For the pos it has good (not great) cash flow,

low funds ownership (13%), larger mgmt position at 29% on a 38.2 million 
float.  Return on equity of 17%.  Earnings have been increasing every year 
for past 5 years (except for a small drop in '99), with quarterly, year over

year, growth rate of >50% the past two reporting periods.  Sale growth 
expanding it 28% past two quarters.

The chart -- since 9-11event KKD has been working a nice nearly parallel 
price channel with higher highs and lows.  It has been bumping the lower 
price channel yesterday and Tuesday as I read the chart.  It's lower channel

does not appear to penetrate the 50 day average.

We made off of KKD last year.  We got out near high in early July and got in

again (modest position) at it's low in early November.  

As I said we are not playing this as a CANSLIM investment.  What we see is a

company with a hugh potential, good management who is working an aggressive 
well underwritten expansion model.  Currently KKD is in only 30 some states 
in the US and Canada.  It recently announced plans to expand into Europe 
(which could be a negative).  My guess(!!) is KKD has the horses to hit $90 
by October.

We have thought about purchasing a franchise in Minnesota (first Minnesota 
franchise will open soon), however finding a suitable location/traffic flow 
site is judged to be major consideration for this type of high volume 
retailing.  I think we will stick with our modest stock ownership this 
summer.

Howard




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