Market Overview

Bill Ackman Is Killin' It In Chipotle

Bill Ackman Is Killin' It In Chipotle

There has been much talk of Bill Ackman losing his magic touch over his disastrous bets on Valeant Pharmaceuticals Intl Inc (NYSE: VRX), where he lost $4.6 billion, and his infamous short on Herbalife Ltd.(NYSE: HLF), which has gained 22 percent on the year and sparked a movie release on his position in the company.

Let's Taco 'Bout It

It appears he did get one right recently, on Chipotle Mexican Grill, Inc. (NYSE: CMG), after its stock hit a 52-week high on Monday. The Mexican food chain's latest move could be the start of a sentiment shift for a company that suffered a massive food health scare in 2015, that prompted a rapid decline in store traffic, a 22-percent drop in same-store sales in the third quarter of 2016.

Ackman acquired a massive stake in the company in 2016, a contrarian play at a time when the stock had fallen considerably out of favor. He purchased a 10 percent stake in the company, nearly 2.88 million shares at $418. This puts his current stake at nearly a $150 million gain. At the time, Ackman called Chipotle undervalued and “an enormous growth opportunity.”

Despite a recent rare win for Ackman, Chipotle’s 52-week high may further indicate his lack of foresight. His Pershing Square firm filed a prospectus with the SEC on March 3 regarding a possible sale of his entire stake in the company, right before the stock rallied to its current highs. The move did not indicate a plan of immediate sale but was instead reserving its right to do so later.

News of a recent 5-percent menu price increase at around 20 percent of Chipotle’s stores has shares moving higher. Chipotle’s comeback could not come at a better time for Ackman who has really been struggling in the market on his high-profile bets.

At last check, shares of Chipotle were up 1.34 percent on Monday.

Related Links:

'Betting On Zero', Bill Ackman's Anti-Herbalife Film, Rated 100% On Rotten Tomatoes

Bill Ackman and Valeant: A History


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