Some may have thought my response to Krispy Kreme's
David, who quite some time ago picked Krispy Kreme as a stock for Motley Fool Stock Advisor, is reacting with a cool head. He brought up the uncertain nature of an SEC probe, which can add up to nothing, or, of course, end up being more serious. Indeed, yesterday's news stirred up fears of the great unknown, compounded by the questions that have surely been swirling over recent months.
However, in response to the news, David stood firm on his recommendation of Krispy Kreme. He's not motivated to sell or close out his position right now, though he understood the market's dire reaction. He indicated that he wouldn't buy now either.
Of course, questions about Krispy Kreme's management have been cropping up in investment circles, including our own Krispy Kreme discussion board, for some time. Having conducted an interview with Krispy Kreme CEO Scott Livengood for Fool Radio in the past, David said that he seemed like an all-around good guy, and, of course, we recommend investors gravitate towards companies with good and honest management. However, David pointed out that in so many ways, it's hard to tell unless you do have a personal relationship with someone. (That seems to me as simple and good advice, not only for investing but for all avenues of our lives.)
As I mentioned yesterday, it's certain that some investors are seeing this time as an opportunity to load up on more shares. However, David brought to mind that while the stock will of course look cheap at current prices if the doughnut provider makes estimates this year, when contemplating buying shares in companies, he prefers those that are not in situations like this.
For many, it's been a difficult time to remain calm. David is resisting the market's eagerness to sell at what may turn out to be a bottom while resisting the opposite urge to add to a position during what could be described as the market's equivalent of a fire sale.
Despite my own negative gut response to the news yesterday, I can see his point. During this uncertain time, there's a solid argument that staying cool when the market expects the worst may be the most prudent move of all. Buyers and sellers alike should beware.
Krispy Kreme is one of the Motley Fool Stock Advisor picks that is feeling some pain. Find out what other stocks have been chosen for their exciting prospects by joining Stock Advisor risk free for six months. Needless to say, people are talking about all the issues facing Krispy Kreme, including management and possible silver linings, on the Krispy Kreme discussion board. Add your two cents now.
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Alyce Lomax does not own shares of Krispy Kreme.
