In The Playbook from Gravitational Edge on July 18, we discussed that investors seem to have a conse...
Making the Case for Panera Bread Company
12/15/2008 10:11 am EST
This shows us the year-to-date performance of Panera compared to the Dow. Here we see that the stock has held its own for entire year while the market has struggled. The outperformance makes the stance of the Street somewhat baffling.
According to Zacks, only 4 of 15 analysts (27%) rank the stock with a "buy" rating. In past posts, I have discussed the idea of "trapped bulls," where you have analysts who have been stuck in the bullish camp amid a downtrend. In that scenario, I view the stock as having a risk for downgrades as those bulls look for a place to escape.
In the case of Panera, we have the opposite scenario. I suspect that some on the Street might be feeling left out of the rally and could be looking for an entry point. This could help to provide buying demand on the dips.
Another factor to consider is short interest. According to data collected by our Quantified Analysis group, 36% of the stock's float is currently sold short. In other words, more than a third of the stock's float is tied up in these positions and would need to be bought back at some point.
A look to the intraday chart below suggests that we might already be seeing some short covering here. Three weeks ago, the stock bottomed near 36. At its best levels earlier this week, the shares traded near 53, a gain of roughly 47%.
While Panera might not carry the sex appeal of a tech stock, some might find strong performance pretty attractive.
By Nick Perry of Schaeffer’s Trading Floor Blog
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