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Chipotle Mexican Grill, Inc. (CMG) Pushes To All-Time High, But Is It Really All That And A Bag Of Chips?

Food chain restaurant, Chipotle Mexican Grill, Inc. (NYSE:CMG) released its earnings results for the second quarter of 2015 this week, and the results propelled the stock to an all-time high yesterday after beating expectations. The company posted adjusted earnings per share of $4.45, beating analysts’ consensus estimate of $4.43. The report also showed that the company’s revenue was up by 14.1% for the quarter, posting $1.20 billion. The revenue however slightly missed the analysts’ forecast of $1.22 billion. Interestingly, same-store sales went up by 4.3% during the quarter, which is an impressive performance for the industry and was a key metric analysts were keen on seeing. Nonetheless analysts had forecast a 5.8% uptick in same-store sales. During the second quarter, Chipotle Mexican Grill, Inc. (NYSE:CMG) opened 48 new restaurants in diverse locations. Throughout the year, the company forecasts opening between 190 and 205 new restaurants, a feat that’s expected to improve its overall performance. Over the past year, the stock has climbed by about 10%, which is a healthy growth, considering the competition in the industry. Interestingly, the stock initially plunged Tuesday in after-hours trading following the latest earnings release, dropping by as much as 6%, but that changed during Wednesday trading, as the stock opened at $695.00 and has since soared to over $727, hitting a record high. But is it really all that (and a taco)?


Analyst Keith Siegner of UBS believes the gains were unjustified, and that the only positive element of the earnings report that wasn’t expected was the improved managed food costs, while same-store sales and traffic were both noteworthy misses. Let’s look at what the smart money thinks about Chipotle Mexican Grill, Inc. (NYSE:CMG). Barron’s, a financial magazine, had in early June warned that the stock could go down by between 15% and 20%, citing the general rise in food and healthcare costs. A look at the 13F filings of the hedge funds in our database shows that 37 of the more than 700 that we tracked during the first quarter held positions in the stock at the end of the quarter, having an aggregate investment value of $1.15 billion, up from 35 hedge funds with an aggregate investment value of $1.22 billion at the end of the last quarter of 2014. As the stock dipped by about 5% in the first quarter, that accounts for the drop in capital, so hedge fund sentiment was largely flat during the quarter, suggesting there wasn’t a lot of perceived short-term upside.

We don’t just track the latest moves of hedge funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research which showed that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests, and easily beating the most popular large-cap picks of funds, which nonetheless get the majority of their collective capital. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic only the very best ideas of the best fund managers on your own? Since the beginning of forward testing in August 2012, the Insider Monkey small-cap strategy has outperformed the market every year, returning 139%, nearly 2.5 times greater returns than the S&P 500 during the same period (see more details).

A peak at the insider activity during the quarter shows that many sold their shares during the last three months, with 17 sales being completed compared to only seven open market buys. In fact, it’s only within the last three months that the stock has registered buys over the past year. A total of 364,642 shares were sold during the past three months, compared to 1,286 shares bought. Notably, both Co-CEO’s sold shares yesterday following the rally, with Chairman and Co-CEO Steve Ells selling a little over 10,000 shares in two transactions, and Co-CEO Montgomery Moran selling over 14,000 shares in four transactions.

While performance and insider activities are important metrics when analyzing a stock, Insider Monkey also looks into what the smart money thinks. That’s why we analyze hedge fund activities relating to every stock in our database. Let’s check out the latest such action in Chipotle.

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