Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Domino's Pizza
So what: Trading volume was 2.6 times the three-month average, as Capital IQ tracked declining short interest. Why cover now? First-quarter financials came in well above estimates. Revenue rose 2% to $389.2 million, while adjusted profit improved 20% to $0.42 a share. Analysts were expecting $380.6 million and $0.34, respectively, according to Yahoo! Finance data.
Now what: Yet the report also had its flaws. Domestic same-store sales declined by 1.4%, well off last year's 14.3% gain. International comps rose by 8.3%, but Domino's overseas operations still account for less than 12% of sales. So although the shorts are probably right to cover, I'd wait for a lower price or fresh evidence of rising comps before opening a new position in this two-star stock. But that's also the minority opinion around these Foolish parts.
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Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of Domino's Pizza and is also on Twitter as @TheMotleyFool. Its disclosure policy is at least 10% better than other disclosure policies.