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  • The Flood Of Facebook Shares Is Coming - Grab Your Ark [View article]
    Ah, good catch on the wording / spelling. I meant to say "scarcity" value. Thanks for the question!
    Oct 17, 2012. 10:15 AM | Likes Like |Link to Comment
  • The Flood Of Facebook Shares Is Coming - Grab Your Ark [View article]
    Do you have a price you'd be interested in buying the stock? I'm a believer that every (almost) stock has a price to be a buyer at.
    Oct 16, 2012. 06:36 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    Very good points, and I agree with you on many. I totally agree that restaurants can be very faddish; my bet, as scary at it may be, is that Chipotle is "different". It's a McDonald's, not a Krispy Kreme. If I am wrong, I will lose money on this investment. When I talk to customers of Chipotle, there is a passion and loyalty that I rarely (if ever) have seen in the restaurant world. This stems from well above-average customer service. However, more importantly, I think management has built a truly unique culture at Chipotle, one of excellence and building leaders. The company is focused on hiring internally, building the skills of all employees to some day run a store(s) or region. When I covered the restaurant industry at Putnam, I never came across a culture like this (albeit I didn't have 1x1 interviews with management; it was from conference calls and other "channel" research.)

    As for P/E, i know you are an old curmudgeon, and like value. I can't argue on this, I just have a higher risk profile (and less intelligence!).

    Bottom line for me, CMG is best-of-breed like RAX. But I will admit, I like RAX's fundamentals a little better. But I think RAX is more fairly-valued than CMG right now.

    Thanks for the great dialogue!
    -IMac
    Oct 15, 2012. 05:18 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    Hi The Fox,

    Good point on the % size. I noted in my reply to Jerryki that the position is 8% right now. I rarely go above 6% and 8% is the max I go for risk management purposes.

    -Best
    Oct 15, 2012. 03:01 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    Hi Jerryki,

    Thank you for the complement on the article.

    As for the size of the position, it's 8% of my portfolio. I have a strict risk management process that prevents the fund from making a single position larger than 8%. I will dial this back to a more normal 4% - 5% range if the stock rallies hard, but I do want to own a core position for a long time.

    I run the portfolio more aggressively than most. My investment philosophy is to get a very high degree of conviction in the stocks I own, and then make large bets. I keep a concentrated portfolio because I want to keep my "sand box" of stocks that I play in relatively small, making the research process more manageable.

    Lastly, I am more aggressive than normal here with CMG because I think the stock has been unfairly punished recently and there are too many shorts piled in here. Just my take.

    -IM
    Oct 15, 2012. 03:00 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    The first part is true, but has also been true for 2 years now. Why is it such a negative now? Also, almost all of Chipotle's competitors face the same issue. So this is not a competitive disadvantage (but I know Einhorn is saying this for absolute EPS impact).

    What if Romney wins? I think it's a risk, but should have been factored in by the market and the reaction seems overdone to me.

    What do you think?

    -IM
    Oct 15, 2012. 02:50 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    Rightly or wrongly, many investors view stocks relative to one another (like home buying). This is why I look at other best-of-breed companies exposed to similar health trends. As you point out, HAIN and WFM may be over-valued, but as long as the market doesn't tank (I have no insight here), then these valuations provide a framework for investors to compare and contrast CMG against. I am not saying this is right, but just how the investment world works. If the market pukes and valuations compress, Chipotlw will be hurt as well.

    As for LULU, my thinking is this: it's a play on people (mostly women) trying to stay healthy and look good. They are staying healthy via Yoga and use Lulu pants / tops to look good during their healthy activities. This is how I make the association with Lulu and the healthy trend.

    It may be a stretch....pun intended.


    Oct 12, 2012. 02:16 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    In terms of commodity inflation, yes that's a risk. But it's also transitory as the record-setting drought this past summer will likely not happen two summers in a row (almost by definition). And the entire fast food, fast casual, and sit-down restaurant industry will feel the same pain. Because the other companies will be dealing with higher food costs over the next few quarters, and these stocks have not sold off 30%, I feel as though slowing SSS was the primary reason for the stock getting pounded. Chipotle was (and still is a momentum name) so any slowing in this metric, which is what all investors use as a shortcut to try an assess business trends, is the driver of this stock and other retailers (food, clothes, etc).

    I spent 7 years as a professional investor at one of the largest mutual funds in the world covering companies that released SSS, and this was without question the #1 data point investors focused on. This is what's forming my opinion on the importance of comps (for what its worth).

    Certainly I am worried to be betting against Einhorn for the reasons you lay out, but my best investments are always the one's that feel the "worst". Time will tell!

    Best,
    Oct 12, 2012. 02:11 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    Thanks for the thoughts, The Fox. You make a very good point about value per location. That is a very big difference, and certainly deserves some thought.

    As for the balance of the piece, I feel as though there is plenty of negative analysis of the company given that the most visible and popular hedge fund manager in the world laid out his case the other week, so I felt as though the positive should be highlighted. Rightly or wrongly, I was just stating my opinion and it's overly positive.
    Oct 12, 2012. 02:02 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    Hi twhite113,

    If the company cannot put up ~25% EPS growth that I expect over the next few years, then I agree with you that $275 is a fair valuation. But my thinking is that the last quarter was a bump in the road, like an all-star baseball player having a slump but still bats .350 for the year.

    If I am right, I think the valuation will quickly expand again b/c Einhorn has caused the market to "give up" on this story. I think the best analogy is Rackspace (RAX). two quarters ago people said the story was over because they had one "soft" quarter. Then they posted a solid Q2 and the stock rallied 50% because investors realized that the company is still best-of-breed. I'm hoping this scenario plays out again with CMG.

    Lastly, I think Chipotle, when compared to every other fast food or fast casual restaurant, offers a superior quality product and is considered healthy. What restaurant provides healthier food in your opinion?

    Thanks!
    Oct 12, 2012. 01:59 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    Hi williampike02,

    Thanks for the comment. I have not thoroughly vetted the management's claim of fully organic / free range, so I am trusting management on this.

    At least I know it's not meat laced with cardboard and pink slim at Taco Bell. :)

    Best,
    Oct 12, 2012. 01:49 PM | Likes Like |Link to Comment
  • Why Chipotle Is My Biggest Position [View article]
    Hi MohanTX,

    Fair enough. I just look at the company as play into a growing trend in America as people look to eat better, know what's in their food, and like to source local products.

    Even if this is a point of disagreement, there are several other reasons I think the stock deserves a premium multiple (revenue growth potential, business model profitability, solid management, and simple business model).

    What do you think is a fair multiple on forward EPS?
    Oct 12, 2012. 01:46 PM | Likes Like |Link to Comment
  • Rackspace: The Best Business Model In The World [View article]
    Interesting point.
    Oct 5, 2012. 11:29 AM | Likes Like |Link to Comment
  • Rackspace Hosting: Q2 Growth Not Fast Enough For Valuation [View article]
    Rackspace is the 2nd largest player behind Amazon.

    Here is my latest: http://seekingalpha.co...
    Oct 3, 2012. 02:02 PM | Likes Like |Link to Comment
  • Why You Should Buy Red Hat Now [View article]
    Dana,

    Great overview of the opportunities in front of Red Hat. It is amazing how fast technology is changing these days, which gives open source and its focus on the crowd for innovation such a powerful edge!
    Oct 3, 2012. 12:44 PM | Likes Like |Link to Comment
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