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Chipotle Mexican Grill, Inc. Message Board

  • riley200834 riley200834 Apr 5, 2012 2:47 PM Flag

    Earnings mustv'e leaked ............

    and they are gonna be good. Sell off after earnings. U Heard it here first

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    • Pi:

      It is important that one doesn't think of institutional holders as monolithic. Long only funds have wildly different incentives that logn/short hedge funds. Long only funds can really only make money taking a position higher. They've been distributing for some time. And, they've been happy to have the 45% ride because naive people who haven't followed CMG will think they are getting a "deal" buying at 300 as earnings continue to grow slowly moving forward, only to see the big boys keep selling down into the mid to low 200's.

      Furthermore, even long only funds have wildly different incentives depending upon how much they hold. Some can liquidate without moving the market meaningfully, while others cannot. But, most importantly, long/short hedgies can reverse at any time. If I were them, I'd wait until right before earnings to buy a ton of puts and liquidate. Short interest is LOW right now. I suspect shorts will start piling in after earnings, especially if results are good and it squeezes because the WILL BE the top.

      QE will only hurt CMGs fundamentals. It transfers money from consumers to speculators/investors. More in May/June but things are going to really start degrading for the restaurant sector in general and CMG in particular over the next 12 months. This has been a really crowded trade for the past 3-4 months that has worked really well because it is so crowded, but it will prove to be a horrible investment to have bought CMG over 300...

      Pre QE, CMGs multiple was 30 (I think it was below 20 during the crisis). It is now 62.5, despite being much larger and having significantly less room to grow... Normally, multiples compress as companies' market cap grows. The next 12 months will witness significant multiple compression (in the last period of stagflation, the 70's, market multiples were 8-10). Sure, a growth company like CMG will have a higher multiple, but it will compress relatively more. I haven't found the highest multiple on a company over $5B in market cap for that period, but I guarantee it was a lot less than 60 and probably between 25-35...

      Good luck.

    • If earnings are good this isn't selling off. Cmg may have become The equity equivalent of a perpetual energy machine. Why sell? This could go down 20 points and I could still get paid 400. Only risk is withdrawals from the funds that own it and that doesn't look likely

    • noluckneed3d Apr 5, 2012 3:03 PM Flag

      Hey Riley. You clearly missed the last earnings report.

    • If it did, it would be trading at 300. Don't you think gas prices and imput cost are a problem? Also, their desirable locations to expand are seriously limited.

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