Chipotle Mexican Grill
2013 is panning out to be a stellar year for shares of
Chipotle Mexican Grill (
CMG). The $12.5 billion fast-casual restaurant chain has rallied more than 36% since the start of the year. But even though short sellers in CMG are feeling the pain right now, they're not paring down their bets against Chipotle. As I write, Chipotle sports a short interest ratio of 12.1.
That means it would take almost three weeks of buying at current volume levels for shorts to exit this stock.
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Chipotle has seen huge success by offering a simple menu of high-quality ingredients. Today, the firm boasts more than 1,500 restaurants in 43 states and four countries. While many competitors have stepped in for a piece of CMG's market, Chipotle's brand positioning as a seller of less-processed, more-natural meats and dairy products isn't easily replicated. At the same time, there's significant room for growth domestically, where Chipotle's stores are concentrated in a few core areas. Expansion beyond North America remains challenging, but CMG's limited store footprint overseas is showing a few glimmers of hope.
From a financial standpoint, a debt-free balance sheet is impressive. To date, CMG has managed to finance new store openings primarily with retained earnings, a fact that adds substantial value to shareholders' positions. As CMG continues to execute in 2013, short sellers should be wary of more of the same.
To see these short squeezes in action, check out this week's
Short Squeezes portfolio
-- Written by Jonas Elmerraji in Baltimore.
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