Chipotle Crashes (Again)

Investors in Chipotle Mexican Grill (CMG) were shocked again by the company’s disappointing earnings results and the tumble in its share price that followed. Investors have been faced with losses of nearly 18% in just two days. Only three months ago, the stock saw a huge drop of roughly 25% in the aftermath of the previous quarter’s earnings release. In July, we featured an article on that crash and how investors could have avoided it. The analysis we provided in that article still holds true today. Chipotle continues to be an overvalued company and we advise investors to take serious caution regarding stock purchases. The stock’s price has seen extreme volatility (mostly to the negative side in recent months) and the growth potential for the company’s brick and mortar restaurants remains dim. Sector wise, investments in the restaurant industry tend to produce uninspiring results and can destroy a portfolio and an investor’s fortune in just a few short hours. This is why we’re strong proponents of the hybrid portfolio method that provides insulation against losses like these but superior returns┬ánonetheless. If you’re one of the unlucky holders of CMG stock, you should consider cutting your losses because the next drop like this could be just around the corner.