4 Stock Success Stories From the 2009 “Sucker’s Rally”: Fifth Third Bancorp (FITB), Office Depot Inc (ODP), Krispy Kreme Doughnuts (KKD)

The final stage of this junkie odyssey is right around now. This is where the manager or trader who was either too much in cash or worse, had too many shorts on, reaches for the real garbage to catch up. We saw the beginning of that this past week as Krispy Kreme Doughnuts (NYSE:KKD), a company that has managed never to do anything right since its IPO eight years ago, ran up 50% in one day on the fantastic news that their creditors would not, in fact, push them into bankruptcy. When you start to see the bankruptcy candidates and 90-cent stocks putting on 40% and 50% moves, you are looking at the equivalent of a drug addict sucking the nitrous gas out of a whipped cream canister, so desperate for that final high that he’ll pretty much try anything at the end of the night.

Yet Krispy Kreme somehow managed to do something right after exiting the crash period. Since the Dow bottomed out in 2009, the donut chain’s debt has been cut in half, its cash pile has more than doubled, and trailing-12-month free cash flow has doubled as well. Some of my Foolish colleagues note that merger mania may be a contributing factor in the stock’s rise, and others point out that future cash flows will be stronger thanks to deferred taxes, which will aid in further trimming debt and boosting cash balances. Krispy Kreme Doughnuts (NYSE:KKD) grew too fast in the past, but its management seems to have chosen a more sustainable path this time.

What happened to AIG?

Trailing-12-month earnings per share in 2009: -$756.85
Most recent TTM earnings per share: $2.04
Debt-to-cash ratio in 2009: 14.8
Most recent debt-to-cash ratio: 42.1
Total return from start of crash to today: 97%

Most of these stocks were singled out by one or two writers, but not AIG. As the recipient of more government bailout money than any other institution in the world, the insurance giant had a massive bull’s-eye on it throughout the recovery:

Insurance giant AIG extended its surprising rally Thursday, rising 26.9 percent amid frenzied speculation along with improved prospects on its ability to repay its massive government bailout. … Analysts at Briefing.com said the gains were a “garbage rally” in the most at-risk financials, “which began late yesterday afternoon with the massive short squeeze in AIG.”-AFP, Aug. 27, 2009.

With AIG enjoying another rally Friday that sent its stock price up 5% to $50.23, Dan Cook, senior analyst with IG Markets in Chicago, said he isn’t sold on the theory that a short squeeze is the driving force behind the advance. … “There is just no way to value this company,” Cook said, “I don’t believe there is anyone in this world who can tell me if this is really a $5.00 stock or a $500.00 stock.” He cited the potential for lingering exposure to holdings like credit default swaps and the unclear valuations of various assets and subsidiaries as concerns that could come back to bite AIG.-Steve Schaefer on Forbes, Aug. 31, 2009.

There are many more examples of disbelief over AIG’s rebound in its first year, and that remains the case four years on. However, after committing more than $180 billion to stabilizing the insurance giant, the federal government has shockingly managed to generate nearly $18 billion in profit from its efforts. AIG is now no longer owned by Uncle Sam, which sold its stake late last year, and its debts have plummeted — though, unfortunately, that has come at the expense of what was once a formidable cash hoard. This isn’t your daddy’s AIG, but it’s not your government’s AIG, either. It’s a company in transition. Thus far, that transition has been managed well, which has vindicated early buyers, but there’s still a long way to go before AIG reclaims its pre-crash standing.

The article 4 Stock Success Stories From the 2009 “Sucker’s Rally” originally appeared on Fool.com and is written by Alex Planes

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and Fifth Third Bancorp and has the following options: Long Jan 2014 $25 Calls on American International Group.

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