Taking a Bite Out of Dunkin’ Brands
Dunkin’ Brands (DNKN) , the parent company of Dunkin’ Donuts and Baskin Robbins, debuted today on the Nasdaq under the ticker DNKN. Some analysts thought this debut was too rich, given that shares of the initial public offering were priced at $19, but the stock opened at $25 and is currently up more than 50%.
Investors should also consider that Dunkin’ Brands is owned by a consortium of private-equity firms and is carrying nearly $1.9 billion worth of debt on its books. The offering today raised $423 million for the company.
That said, Dunkin’ Brands is no Internet 2.0 flash in the pan, and I like this company not only because it’s a homegrown Massachusetts success story but because it’s a solid franchise with a lot of growth potential, given its lack of penetration in markets west of the Mississippi.
ETF investors looking to get in on the Dunkin’ Brands action might want to consider a consumer discretionary or small-cap growth fund, although there’s no guarantee that any of the funds that currently hold peer stocks like Starbucks (SBUX) , Chipotle Mexican Grill (CMG) or Panera Bread (PNRA) will add Dunkin’ Donuts when their indices rebalance.
The Consumer Discretionary SPDR (XLY) , for instance, only holds S&P 500 components, and Dunkin’ Brands obviously hasn’t made that cut yet. Small-cap growth funds like the iShares Russell 2000 Growth ETF (IWO) and the Vanguard S&P Small-Cap 600 Growth Fund (VIOG) have similar index restrictions. This isn’t to say, of course, that Dunkin’ Brands won’t one day make its way into a marquee name index; it’s just not going to happen right away.
The PowerShares Dynamic Food & Beverage Portfolio (PBJ) uses a home-grown index that rebalances quarterly, and Dunkin’ Brands appears to fit its investment criteria. The First Trust Small Cap Growth AlphaDEX ETF (FYC) and the PowerShares Fundamental Pure Small Growth Fund (PXSG) also use proprietary indices and are thus more likely to incorporate Dunkin’ Brands into their holdings in the near term.
