Bill Ackman (Trades, Portfolio) has revealed another reduction in his holding of Chipotle Mexican Grill Inc. (CMG, Financial) according to GuruFocus' Real-Time Picks, a Premium feature.
The guru's New York-based hedge fund takes large positions in underperforming companies with the intent of pushing management to make changes. This activist strategy allows the hedge fund to unlock value for shareholders.
On Jan. 5, Ackman sold 75,096 shares to reduce the Chipotle holding by 6.47%. On the day of the transaction, the shares sold for an average price of $1,339.15 each. Overall, the trade had an impact of -1.14% on the portfolio and GuruFocus estimates that Ackman has gained 129.70% during the lifetime of the holding.
With $5.6 billion in systemwide sales during 2019, Chipotle Mexican Grill is the largest player in the $16 billion domestic fast-casual Mexican restaurant category. Its menu includes burritos, bowls, tacos and salads, which are made from higher-quality ingredients than those typically found at quick-service restaurants. As of September, Chipotle operated more than 2,700 company-owned restaurants in the United States, Canada, the United Kingdom, France and Germany.
On Jan. 7, the stock was trading at $1,368.14 per share with a market cap of $38.28 billion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 1 out of 10. There are currently three severe warning signs for assets growing faster than revenue and declining operating and gross margin percentages. The weighted average cost of capital outweighs the return on invested capital, indicating the company will likely destroy value as it grows.
Ackman is the sixth-largest guru shareholder with 3.88% of shares outstanding. He follows Vanguard Group Inc. (Trades, Portfolio), T Rowe Price Associates Inc. /MD/ (Trades, Portfolio), BlackRock Inc. (Trades, Portfolio), State Street Corp. (Trades, Portfolio) and Jim Simons (Trades, Portfolio).
Portfolio overview
At the end of the third quarter, the guru's portfolio contained seven stocks, with no new additions. Overall, it is valued at $8.82 billion and it has seen a turnover rate of zero percent. Top holdings at the end of the quarter included Lowe's Companies Inc. (LOW, Financial), Chipotle Mexican Grill, Restaurant Brands International Inc. (QSR, Financial), Agilent Technologies Inc. (A, Financial) and Hilton Worldwide Holdings Inc. (HLT, Financial).
By weight, the top three sectors represented were consumer cyclical (78.86%), health care (14.01%) and real estate (7.13%).
Disclosure: Author owns no stocks mentioned.
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