Krispy Kreme Doughnuts (KKD): Are Hedge Funds Right About This Stock?

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In the eyes of many market players, hedge funds are perceived as overrated, outdated investment vehicles of an era lost to time. Although there are over 8,000 hedge funds in operation today, this site looks at the moguls of this group, around 525 funds. It is widely held that this group oversees the lion’s share of all hedge funds’ total assets, and by monitoring their best investments, we’ve come up with a number of investment strategies that have historically outpaced the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as useful, positive insider trading sentiment is a second way to analyze the stock market universe. As the old adage goes: there are a variety of incentives for an upper level exec to cut shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this method if investors understand where to look (learn more here).

Krispy Kreme Doughnuts (NYSE:KKD)

Keeping this in mind, we’re going to analyze the recent info for Krispy Kreme Doughnuts (NYSE:KKD).

What have hedge funds been doing with Krispy Kreme Doughnuts (NYSE:KKD)?

At the end of the second quarter, a total of 21 of the hedge funds we track held long positions in this stock, a change of 0% from the first quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes considerably.

When using filings from the hedgies we track, Drew Cupps’s Cupps Capital Management had the most valuable position in Krispy Kreme Doughnuts (NYSE:KKD), worth close to $38.7 million, accounting for 3.1% of its total 13F portfolio. The second largest stake is held by Jim Simons of Renaissance Technologies, with a $22.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include Donald Chiboucis’s Columbus Circle Investors, Richard Driehaus’s Driehaus Capital and Cliff Asness’s AQR Capital Management.

Judging by the fact that Krispy Kreme Doughnuts (NYSE:KKD) has witnessed a fall in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their positions entirely at the end of the second quarter. At the top of the heap, Mark Broach’s Manatuck Hill Partners said goodbye to the biggest stake of the 450+ funds we key on, totaling an estimated $2.6 million in stock. Jeffrey Vinik’s fund, Vinik Asset Management, also dumped its stock, about $1.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with Krispy Kreme Doughnuts (NYSE:KKD)?

Insider buying made by high-level executives is at its handiest when the company in question has experienced transactions within the past 180 days. Over the last 180-day time period, Krispy Kreme Doughnuts (NYSE:KKD) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Krispy Kreme Doughnuts (NYSE:KKD). These stocks are DineEquity Inc (NYSE:DIN), Sonic Corporation (NASDAQ:SONC), Bob Evans Farms Inc (NASDAQ:BOBE), AFC Enterprises, Inc. (NASDAQ:AFCE), and BJ’s Restaurants, Inc. (NASDAQ:BJRI). This group of stocks are the members of the restaurants industry and their market caps are similar to KKD’s market cap.

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