By Brian O'Keefe

Talk about a sugar high. In April 2000, just as investors' sweet tooth for technology was leading them to a four-cuspid root canal, the stock of Krispy Kreme Doughnuts debuted on the Nasdaq at $32 and started to climb. Weirdly, it hasn't stopped climbing. Since Krispy Kreme's IPO, the Nasdaq is down 48% but shares of the doughnut maker, based in Winston-Salem, N.C., are up 400%, and the stock has twice split two for one. The only thing higher than its shareholders' ride is its price/earnings ratio -- a dizzying 129 at last check.

But while lucky investors, market mavens, and a battery of cynical journalists have watched in awe, I have had a more emotional response. Full disclosure: I go way back with Krispy Kreme -- having grown up in Birmingham, Ala., one of what the company now calls its "core heritage markets." In fact, my earliest memory is of my father feeding me bits of the famous Original Glazed while he made Sunday morning coffee. But the Krispy of my youth was a sleepy Southern company -- the local shop where old men read the paper and traded fishing stories -- not a hot stock. Could it really be a long-term vehicle for wealth accumulation? With that question in mind, I set out to examine various explanations for its surprising success.

It's the new Starbucks. McDonald's hit it big with the hamburger. Then Starbucks cornered the overpriced latte market. Every once in a while a single company manages to reinvent a tired culinary concept and ends up a staple in every mini-mall and major traffic intersection. Is Krispy Kreme that next, tastebud-oriented growth stock?

On the surface, the Starbucks comparison seems as natural as coffee and doughnuts. A year after going public in 1992, Starbucks was a thriving 250-location chain, with new shops opening all the time. The stock had shot up more than 200% since the company's IPO. At a similar juncture in its history, Krispy Kreme is busy expanding its network of 180 franchises and posting a string of record earnings.

Skeptics, of course, sneered at $5 cups of joe, but investors who saw a return of more than 600% on Starbucks over the past seven years might be hungrily eyeing Krispy Kreme's 89% growth in diluted earnings per share over the last year. Still, even Deutsche Banc Alex. Brown's John Glass, probably Krispy Kreme's biggest advocate among analysts, points out the limits to the comparison. The average Starbucks customer makes 18 visits a month. And although Krispy Kreme has plenty of room to expand, it's unlikely to succeed by putting a shop on virtually every corner, the way Starbucks has done in some cities. "People are not going to eat that many doughnuts every day," says Glass. "At least I hope not."

It's the new Boston Chicken. Some observers see more ominous similarities between Krispy Kreme and another restaurant stock from the early 1990s -- the infamous Boston Chicken. "People loved the chicken and the stock, even when it was selling at 100 times earnings," says John Zielinski, manager of the Northern Growth Equity fund. "It's the same kind of devotion."

Like Krispy Kreme, Boston Chicken was a regional chain with a cult following. The company went national by selling franchises (as Krispy Kreme does), expanded rapidly, and watched its shares skyrocket early on. But within a few years the chicken chain was drowning in debt. The stock tanked. After filing for bankruptcy protection, it was acquired by McDonald's, mainly for its real estate.

Will Krispy Kreme suffer the same fate? Not likely. Boston Chicken got into deep debt largely because it lent loads of money to franchisees to fuel expansion; Krispy Kreme doesn't offer financing. Moreover, Krispy Kreme knows a thing or two about managing its books. In 1982 a group of longtime franchisees led a leveraged buyout of the company, then owned by Beatrice Foods. For the next decade Krispy Kreme eschewed growth, concentrating on its solid wholesale business to pay down the debt. Not only do the franchises provide a constant revenue stream to the company by buying its doughnut mix, but they are also among the most profitable in the industry for owners.

It's all about timing. Krispy Kreme, with its easy-to-understand story, emerged on the Nasdaq just as hard-to-fathom tech bets went sour. The stock immediately attracted momentum investors who pushed the price up. Then came the short squeeze. Krispy Kreme's hot run and high valuation attracted a slew of short-sellers -- who borrow shares of a stock from a brokerage and sell them, betting that the price will drop and they can then purchase the shares they owe at lower prices. When the price rises, as Krispy Kreme's has continued to do, shorts are forced to "cover," or buy back shares at a higher price. The scramble to reacquire shares forces the price of the stock ever higher.

This spring, before hopping to the NYSE, Krispy Kreme ranked among the most-shorted stocks on the Nasdaq. As the number of short shares dropped (while short-sellers covered) from 6.4 million in mid-April to 5.9 million in mid-May, the stock ran up 56%. Even Krispy Kreme bulls like Glass admit that much of the stock's run this year has been the short interest and momentum money combining to create a perfect market storm. And we all know what can happen if you get caught in one of those.

It's really a tech stock. For those unconvinced that market forces can account for the phenomenal success of a lowly doughnut, there is the underground theory that Krispy Kreme is really the next big tech play. Details are sketchy, but rumors are spreading that the famous glaze has superconductive properties. Could this be the vaunted next new thing? A new D2D (doughnuts-to-dollars) play? Perhaps the first "broad waistband" stock? The company denies all. "There are no people in space suits adding silicon chips to the doughnut mix," avers CEO Scott Livengood. "We're just making doughnuts here. But I'm not ruling anything out."