Buy General Motors Co. shares and sell Chipotle Mexican Grill Inc. short, hedge-fund manager David Einhorn said today at the Value Investing Congress in New York.
GM is inexpensive and the largest U.S. automaker should work toward buying back the government’s stake from its 2009 bailout, said Einhorn, who helps oversee $7.7 billion as president of Greenlight Capital Inc. The automaker’s European operations may break even in 2015, he said. Chipotle, the best-performing restaurant stock in the Standard & Poor’s 500 Index last year, has “one of the fanciest multiples” and the company’s profit will be hurt by increasing competition, the short seller said.
“We expect GM’s international operations to improve,” Einhorn said. Chipotle is vulnerable as “the biggest challenge comes from a resurgent Taco Bell,” he said.
Chipotle fell 4.2 percent to $302.96 today, the biggest decline since July 20. GM rose 2.6 percent to $23.68.
Chipotle’s ability to raise prices is limited given competition from Taco Bell, rising food prices and eventually increased worker health-care costs, Einhorn said. The price-earnings ratio is 36, compared with 20 for the S&P 500 Restaurants Index, according to data compiled by Bloomberg.
Einhorn, known for betting against Lehman Brothers Holdings Inc. before it collapsed in September 2008, reiterated his recommendation from last year’s investing congress that investors short Green Mountain Coffee Roasters Inc., the maker of Keurig single-serving coffee brewers, saying competition will increase. In a short sale, a trader sells borrowed shares, hoping to replace them later after they fall.
U.S. health insurer Cigna Corp. was also among the stocks Einhorn recommended today. The money manager disclosed in a July 23 letter that he bought shares in Cigna and Coventry Health Care Inc. during the second quarter.
Greenlight returned 3.4 percent in the first half of the year, according to the letter, a copy of which was obtained by Bloomberg News. Hedge funds gained 1.1 percent, according to data compiled by Bloomberg.