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.
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