Dunkin’ Brands (DNKN): Big investors have been accumulating

CWA By Michael Cintolo, Editor of Cabot market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 6/7/12 Sign up for Cabot Wealth Advisory e-newsletter

One name I keep coming back to is Dunkin’ Brands (DNKN); to be clear, it’s not a fast-moving stock that I expect to be a huge winner. However, don’t let that turn you off—DNKN is a newer stock (public since last July) that has a well-established business and a big international opportunity. Here’s what I wrote about the company in Cabot Top Ten Trader this past Monday:

“National Donut Day was just last Friday (June 1), so Dunkin’ Brands should be on everyone’s mind. With more than 10,000 Dunkin’ Donuts locations and more than 6,700 Baskin Robbins ice cream shops in 56 countries worldwide, Dunkin’ Brands is a giant in the quick service restaurant business. In addition to donuts, Dunkin’ Donuts locations serve bagels, hot and cold coffee and other baked goods, while Baskin Robbins specializes in hard-serve ice cream. The company is nearly all run on a franchise basis, and franchisee sales amounted to about $8.4 billion in 2011. The push for wider distribution has led to the establishment of kiosks and mini-stores within other retail spaces, gas stations, hospitals and airports. Dunkin’ Brands hit a home run with its Q1 earnings report that was headlined by a 213% gain in earnings per share on a 9% increase in revenue. After-tax profit margins topped 20% for the second straight quarter. Baskin Robbins has been making ice cream since 1946, and Dunkin’ Donuts made its first donut in 1950. Together, they’re expanding internationally with great success.”

As for the stock, it’s impressively remained above its 50-day moving average for all of this year (excluding a brief shake below it last Friday), and has tightened up between 31 and 34 since late-April. It’s a sign that big investors are accumulating shares during this market maelstrom.

You could buy a little around here with a super-tight stop around 30 or 31, but my advice is to just watch it, and if the market confirms a new uptrend, look for a powerful push above 34 as your signal that the next upleg has begun.

Editor’s Note: Mike Cintolo is editor of Cabot Market Letter, which Hulbert Digest (the keeper of the keys of newsletter performance) just announced was the second-best-performing newsletter in the country during the past five years. Mike has produced such returns by fine-tuning Cabot’s time-tested (since 1970!) stock picking, portfolio management and market timing rules to guide the Market Letter’s Model Portfolio–a concentrated portfolio of the market’s most dynamic growth stocks. If you’re tired of being tossed around by the market and want to follow a proven editor with a proven track record, I highly recommend giving the Market Letter a try today. Click here to learn more.