Question: I'm thinking about investing in one of the doughnut companies, like Krispy Kreme or Dunkin' Donuts. What is your opinion? Are there any others?

Etienne M.

Answer:

Dear Etienne,

I cannot say specifically if these stock would be "right" for your portfolio as I don't know what else you own and what your financial goals are. But I can give you some general information and then you can make your own decision.

Despite the growing concern on the part of nutritionists and physicians about our overweight population, the doughnut business remains a rapidly growing one. Two of the leading players are the ones you mentioned -- Krispy Kreme and Dunkin' Donuts. To find others, check the food and beverage section in Value Line Investment Survey, (www.valueline.com), available at most libraries.

Why Doughnuts?

Why the doughnut business is robust is open to debate. Among the possibilities -- the price is right. Doughnuts are not expensive. They're easy to eat on the run and not too messy. They're readily available whether you're in Manhattan, Mexico or the neighborhood mall. And the shops that sell them offer other items with everyday appeal -- coffee, tea, hot chocolate, frappes, smoothies, ice cream, sorbets and in some cases, bagels and muffins.

The two companies you asked about:

• Dunkin' Donuts (NYSE: AED; $24.35). This rapidly expanding company has announced plans to add some 300 shops by the end of 2004.
  
  You cannot invest in Dunkin' Donuts as a pure play. The franchise is owned by Allied Domecq of Bristol, England, an international company that specializes in wines, spirits and quick service restaurants. For the 6 months ended February 2003, net profits decreased 17%.
  
  The 52-week high/low is $27.40/$17.14. The dividend yield is 3.54%. The total debt to equity is 2.07. For more information: www.dunkindonuts.com and www.allieddomecq.com.
  
  
• Krispy Kreme (NYSE: KKK; $37.15). This 37-year-old Winston-Salem, NC-based company turns out 7.5 million doughnuts per day, using its carefully protected secret recipe. On June 19th, it opened its first store outside North America -- in Sydney, Australia and in the fall it will move into the UK. It currently has 288 stores in 38 states and Canada, plus the one in Australia; it plans to open 70+ stores during the next year. For the first quarter 2003, net income rose by 48.3% to $13 million.
  
  The 52-week high/low is $40.00/$26.42. There is no dividend. The total debt to equity is 0.23. For more information: www.krispykreme.com.

Good luck!

BUYandHOLD does not recommend any securities. The security mentioned above is being used for illustrative purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy.