Thursday, November 30, 2006
CAKE - Cheesecake Factory
Just for fun, we picked up the Dec30 Puts in Cheesecake Factory (CAKE) at just before the close. I went short on the premise that "upscale casual dining" will only continue to suffer as the economy slows. JP Morgan also named CAKE its top short pick on Wednesday. It looks like the short play will pay off handsomely tomorrow. While CAKE management didn't have the you-know-whats to come clean during the conference call, the company issued a warning via press release that it would miss 4th quarter earnings and revenue estimates in the dark of night - at 9 p.m. eastern time! Can you believe that?? Given the fact that the company opted for subterfuge instead of warning four hours earlier during the conference call when after hours trading was taking place, we anticipate a wrathful reaction Friday morning.