r/valueinvesting
Deciding to pull out of fast food stocks; starting with chipotle
Author plans to exit CMG position, citing high valuation and loss of value appeal despite significant unrealized gains.
- Valuation has expanded to a point where the stock no longer fits a value investing thesis.
- Rapid price appreciation in the fast-food sector suggests potential overextension relative to fundamentals.
Given the current economic status, I am seeing fast food rise quickly, and I no longer see it as a value. I own 74 shares bought at $40, is it worth selling, holding, buying more? Do we think this will bounce back? I'd sell for profit at this point.
Chipotle for me is somewhere in the middle. Decent brand at a more attractive price. The question is how much growth do you expect through the growth of more locations. An easy way for me to think about it is how many locations do the other major chains have (Mcdonalds, Subway etc).
I kinda struggle with companies who's only moat is Brand as there is a fair amount of competition in this niche
There are new ratings ranging between 35 and 50.
For sure. I'll need to see what Chipotle is saying regarding adding more total locations. At a $50 target, this is definitely interesting.
DPZ. Market leader, cheaper. People wont stop eating pizza
I don’t have a clue why anyone sees CMG as a value stock. It’s trading relatively expensively and getting dragged socially. I wouldn’t touch it with others money.
During the last financial crisis (2008-2010), fast food did veryyyy well. People still don't want to cook in a recession and go out with the family once in while. They just end up at mcdonalds instead of a traditional restaurant.
That being said, this time might be different because of the high food inflation and the fast food prices that went along with it ...
I started a tracker on Cava as I found the similarity of present cava to 2006 chipotle irresistible.
Here is a recent valuation on cava
https://www.reddit.com/r/ValueInvesting/s/WjzqkFg9cH
I just bought MCD this week because its at a 52 week low. Not too concerned about the debt because its McDonalds and all the land they own.
I think Chipotle is also around a 52 week low?
Maybe depends on what your time horizon is, but my MCD play is to make around 20%. Might take a year, hoping not too much longer. If it dips I will cost average it every 10% drop or so.
Im new to VI, so open to any challenges to my thought here.
Not that they aren't profitable anyway but with the rise of GLP-1 drugs I'd be careful about non-healthy food stocks, especially shitty-food stocks.
You'd be surprised. People seem to eat the same garbage more now that they have the "get out of jail free card "that is glp-1 drugs. Less personal accountability.