Jim Chanos took to CNBC on earnings day for $DNKN to reveal to the market that he short DNKN. Uh…he is short $DNKN, for 12 months. Being early is the same as being wrong.
Jeez, I wonder why he did that? He did it cause he’s in the hole, and if $DNKN goes any higher, he might get a margin call. He was in the money for 5 months, but wrong for 7 months. $DNKN is now trading SUBSTANTIALLY higher than his entry price would have been.
That’s if Jim Chanos is telling the truth, or acting out of desperation. He might just be misdirecting.
Now, it might actually be that $DNKN will go down. But that’s not genius, that’s market manipulation.
The takeaway is:
Kynikos Associates, with more than $2 billion in assets under management, saw its short-only fund down 12 percent last year, according to sources familiar with the matter. Kynikos’ hedge fund was up 22 percent last year, sources said, adding both funds are about flat in 2018.
Is there a there there?
The simple answer is yes: long term, QSRs are going to be struggling with tight competition. There is a basic problem with the margins of DNKN, and that problem is that it squeezes the franchisees pretty tight, from 2-5% does not a good business make. Basically, if you open a Dunkin’ Donuts, in the current QSR space you aren’t looking at making much money. The only REAL way $DNKN can grow revenues right now is by expanding, opening new stores, and getting more franchisees to pay them. They can’t increase royalties, because there’s not much room in that 2-5%.
Just where are QSRs going from here? Are we looking at a Demolition Man style competition where it’s a race to the bottom, which company is ready to make the least margin? Maybe.