Wednesday, June 10, 2015

First time post on Domino's Pizza [DPZ]

In a recent post where I mocked Pappa John's share price, reader J.T. Marlin commented on DPZ as being a similar bubble.  I liked his DPZ observation enough to make it into a new short play.  The chart is below.  I don't know if this is the start of hyperinflation wherein this exponential chart is just the beginning or if this will turn out to be a mania chart.  Nobody really can know these things in advance folks.  But here is what is important: regardless of what happens over the next 10 years for DPZ, the next 2-3 years should be brutal.

Either it will retrace a-b-c to the level of the prior 4th or it will just go into freefall as a mania collapse plays out.  At $114, the peak could already be in according to my model above.  If you just want a shot at making outsized gains over the next couple years without all the risk of options, just short this thing right now at $112.39 and then set your stop for $114.05.  You risk less than 2pct and your gain will be at least 35% and possibly much higher.

While this is not guaranteed to win, this is investing advice I would give to my mother because it has clearly defined risk and the reward:risk is very high.

Having said that, many people don't see the problem with the fed bubbling everything up like this but that tune will change when pension funds and annuities and mutual funds begin taking monster losses to the point where they eventually default on their scheduled payouts.  Who do you think has been buying this crap?  Sure there are some momo traders out there tagging along but they are followers, not leaders.  Someone else is driving these meteoric valuations.  And its no wonder that it all began just after the fed began to bail out the economy in early 2009.  DPZ is up a whopping 43x since the 2008 bottom.  $10k invested back then is 430k now.  BUBBLE!!

No comments:

Twitter Delicious Facebook Digg Stumbleupon Favorites More