Hedge Fund Consensus Stocks vs. Chipotle Mexican Grill, Inc. (CMG) In 2019

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Chipotle Mexican Grill, Inc. (NYSE:CMG).

Is Chipotle Mexican Grill, Inc. (NYSE:CMG) a buy here? Prominent investors are buying. The number of long hedge fund bets increased by 1 recently. Our calculations also showed that CMG isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

At the moment there are plenty of formulas stock traders put to use to evaluate their stock investments. A pair of the most underrated formulas are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the S&P 500 by a significant amount (see the details here).


Jim Simons of Renaissance Technologies

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to go over the fresh hedge fund action surrounding Chipotle Mexican Grill, Inc. (NYSE:CMG).

What does smart money think about Chipotle Mexican Grill, Inc. (NYSE:CMG)?

At Q3’s end, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CMG over the last 17 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

Is CMG A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in Chipotle Mexican Grill, Inc. (NYSE:CMG), worth close to $1.609 billion, accounting for 1.4% of its total 13F portfolio. Sitting at the No. 2 spot is Pershing Square, led by Bill Ackman, holding a $1.4492 billion position; 23.1% of its 13F portfolio is allocated to the stock. Other peers with similar optimism contain Panayotis Takis Sparaggis’s Alkeon Capital Management, Dmitry Balyasny’s Balyasny Asset Management and James Crichton’s Hitchwood Capital Management. In terms of the portfolio weights assigned to each position Pershing Square allocated the biggest weight to Chipotle Mexican Grill, Inc. (NYSE:CMG), around 23.13% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, designating 7.29 percent of its 13F equity portfolio to CMG.

As industrywide interest jumped, some big names have jumped into Chipotle Mexican Grill, Inc. (NYSE:CMG) headfirst. Armistice Capital, managed by Steven Boyd, created the most valuable position in Chipotle Mexican Grill, Inc. (NYSE:CMG). Armistice Capital had $25.2 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also initiated a $22.6 million position during the quarter. The following funds were also among the new CMG investors: Anand Parekh’s Alyeska Investment Group, Robert Pohly’s Samlyn Capital, and Jay Genzer’s Thames Capital Management.

Let’s check out hedge fund activity in other stocks similar to Chipotle Mexican Grill, Inc. (NYSE:CMG). We will take a look at Parker-Hannifin Corporation (NYSE:PH), Carnival Corporation (NYSE:CCL), Fortive Corporation (NYSE:FTV), and Archer Daniels Midland Company (NYSE:ADM). This group of stocks’ market caps match CMG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PH 25 803965 -1
CCL 29 589089 -7
FTV 34 803239 6
ADM 21 511939 -5
Average 27.25 677058 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $677 million. That figure was $4058 million in CMG’s case. Fortive Corporation (NYSE:FTV) is the most popular stock in this table. On the other hand Archer Daniels Midland Company (NYSE:ADM) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Chipotle Mexican Grill, Inc. (NYSE:CMG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on CMG as the stock returned 91.8% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.