You are applying outdated paradigms. If the government cannot possibly pay its debt, that's all that matters. Eventual outcome is not good for bonds.
Just went to a sub shop that opened up in my neighborhood called Jersey Mikes. Never heard of it before, but stopped in with a coupon, and I will be going there again. It brings subs to a whole new level. Way better than Jimmy Johns. They slice the meat and cheese right in front of you, so you know it's fresh. The size of the subs is huge. Good value. I looked it up on the internet, and found out this is a larger chain that is aggressively adding new locations.
Have you seen the new Wendy's remodels? Wow, they look like CMG's. McDonalds is also remodeling a ton of their restaurants. All else equal, this can't be good for CMG's growth.
The menus are getting revamped as well. The pretzel burgers at Wendy's are fresh and delicious, with quality ingredients. Ring a bell?
Preliminary reports say Thanksgiving weekend traffic is down more than 2% from prior year (excluding internet sales). That's less people on the road, and that's less people driving by CMG's. We'll see how it impacts them.
Nexsan does look to be losing revenue year over year, which is not consistent with what mgmt. was indicating at time of acquisition. They said it was growing 10% a year. With the leveraging of Imation's international channels, they hinted this business would grow even faster. Of course, it seems to have done just the opposite.
For kicks I shorted Apple at around $700, after a huge run, thinking they couldn't find any more good news. Margins were sky high, and sales were growing. Look at them now, down 30%, and worried about margin AND market share shrinkage.
I think Chipotle is in the same spot now. The news can't get much better. They are growing revenue, new stores are performing better than expected, and same store sales growth has accelerated from 3% to 6% lately. It was the competition that took Apple down, after several years of first mover advantage. I think the same will happen to Chipotle. Did I just hear MCD just announced they are spending $3B on 1,000 new stores and remodels? Looks like the fly in MCDs face might get slapped.
It's only gone 10% past your entry point. Wait it out a bit. This could rise some more. When shorting, you always want to have a ton of dry powder. You never want to be forced to cover. That's the mistake most shorts make.
We are witnessing the gradual realization that long term US treasuries will never be repaid. Those who think the US economy will eventually cycle back are kidding themselves. Unfortunately, they will be the ones buying the TLT dips all the way down. The Treasury is going to default. It's unavoidable.
All the corporate money is moving offshore. All the wealthy individuals will be moving offshore too, as this collapses. The only people left holding TLT will be retired bag holders wondering what happened. Hopefully they are diversified enough to eat. At least they'll have the satisfaction of knowing the politicians' pensions will never be paid out.
If you are worried about daily or weekly movements, you are shorting too much too soon. If you have to cover when it goes up 10%, why are you shorting? Better plan is to short a little now, then short more later only if it goes up another 30%. Leave yourself some room to maneuver.
With a 6% increase in throughput this year, can they get another 6% next year? They had to hold off all price increases to get the 6% increase this year. If they raise prices in 2014, will they get the 6% throughput gain?
Can the store layouts handle another 6% increase. I don't know about you, but I like to sit down when I eat, and I don't want to be bumping shoulders with some unknown dude with a goatee and cheap tie. Another 6% throughput increase means they'll need another 6% increase in space. How do they plan to do that? Do they plan to play the music even louder so you want to leave? If you get your food and can't sit down anywhere, that's not a good experience. Or, if you have to sit too close to a stranger, that's not comfortable either.
And what about the parking lots? Many of the Chipotle parking lots I've been to are already quite jammed, with wait times and accident hazards. Will the extra parking traffic keep people away?
And what about that "linebacker"? We know Chipotle isn't going to pay a $2000 Obamacare penalty for his health care, so when his job is cut to part-time, will the 30 hour per week linebacker position offer a convincing career growth opportunity? Will CMG promote any of these part-timers to management positions? I think we all know the answer to that. Additional 6% traffic growth might make them wonder what they get in return for all their hard work and smiles.
Seems to me, there are obvious limitations to traffic growth next year - price increases, restaurant seating capacity, parking lot limitations, a higher mix of part-time workers, etc., not to mention the difficulty of getting another 6% through the food line in the same amount of time.
Bonds are good investment only if there is a credible promise of repayment. How do you think the deficit and Treasury will be doing in a deflationary environment?
I think you are right. If you had $12M to invest in the restaurant sector, would you spend it on shares of Chipotle (i.e., purchasing the equivalent of one CMG store) , or would you rather open 12 new restaurants around town with the CMG like concept. I don't know about you, but I'd rather start the 12 restaurants. I'd start by slowing down the service just a tad in exchange for a better tasting burrito with more chicken and more options. In fact, I'd let them build it, and I'd have them put it on a scale and have them pay by weight. I wouldn't drive nearly as much traffic, or get the 65% return on capital like CMG gets, but I should be able to get a 10% return on invested capital, which is enough to keep a rationale person in business. I'd take some meat-eating folks away from CMG in my market.
Now that MCD has had four flat quarters, the investors are clammering for change. Most notably, CMG is getting thrown out there as a model to emulate. Now that the giant has awoken, what will be the response? In any case, it should be interesting.
The CMG/Panera/Jimmy Johns/ and Subway models are clearly growing. The cheap fast food restaurants (Burger King, MCD, Wendy's, etc.) are not growing. Also, the formal sit-down restaurants are not growing. We're likely to see a lot more convergence towards fast/casual in the next couple years.
I see some people mentioning that EPS declined from 2Q. That's true, but that's always been the case. There always has been an EPS decline from Q2 to Q3 because of the seasonality. This year, the decrease wasn't as pronounced, so that's actually an improvement.
That said, the 6% SSS growth is not all that impressive. If you haven't raised prices for a year or more, of course traffic will increase as your offerings become cheaper on a relative basis. The 6% growth is a far cry from the 10-12% they were posting 1-2 years ago.
Interestingly, the stock now trades at a 51 p/e based on trailing earnings over the last four quarters. When she crashed last time, the p/e was 57, so she might have a little steam left. However, When the p/e was 57 the comps were running at 10-12%. Now the comps are running only at only a 6% rate, so you could argue the stock is in a more precarious position now.
How much do you think insiders will be selling over the next few weeks? I bet any amount of money they run for cover like lemmings.
I couldn't resist shorting couple hundred shares at $505 today. If by chance the p/e rises above 60 in the next few months, I'll be going all in. I don't think the moat is as large as longs believe. The major assets here are the assembly line concept and the quality employee base, which is motivated by realistic opportunities for advancement. The first asset is easy to replicate. The second asset will erode as revenue growth slows, and that's clearly started.
Yes, I will lead it. I've compiled a list of all Fortune 500 C-Level directors and BOD members, Congressman, their addresses, and names of their family members. If somebody would make a few guillotines we can get this revolution started. First, please lose some weight, put down your Play Station, and get a few more bucks from your Mom. You can't expect the other revolutionaries to share their Chipotle burritos with you because antibiotic-free chicken may be in short supply.