Damon Vickers: Einhorn is Wrong on Chipotle

The overarching theme of David Einhorn’s excellent presentation today at the Value Investing Congress was that all investors need to do their own homework and should never follow anyone blindly into a trade. And so I can only assume he’d be glad to see the below dissension over one of his stock ideas from this morning.

Wall Streeter Damon Vickers emailed me this point-by-point rebuttal challenging Einhorn’s short idea in Chipotle. If you read my notes, you know why Greenlight is short CMG, here’s why Damon thinks they’re wrong:


 I will go at his points one by one-

“Chipotle’s biggest challenge is Taco Bell”

This is ridiculous, Taco Bell has been around for years. Chipotle grew in part due to their quality and Taco Bell’s lack thereof

“Taco Bell’s prices are cheaper than Chipotle”

What is David, a first year business major? Taco Bell is cheaper but so is pink slime vs real hamburger customers pay more because they want quality. It’s the same reason someone buys at Whole Foods vs Safeway.

“Only 30% of customers prefer Chipotle vs Taco Bell’s Cantina”

Another ridiculous statement… By and large the two customer bases are different. A customer who buys at Chipotle does so for quality reasons and health reasons. A customer who buys at Taco Bell does so because it’s cheap, only.

“Chipotle has an inability to raise prices”

Chipotle has the same ability or inability as any retailer regarding pricing. The statement that customers wont pay higher prices for quality… is false.

I guess Whole Foods Market should close their doors and go home.

People WILL and do pay for quality. This quality is something Taco Bell does not have, and regardless of the pretty pictures that fast food companies put on their ads… it’s still garbage at the checkout.

We are long Chipotle(CMG)

We are long Yum Brands/Taco Bell (YUM)


Thoughts? Who is right? Einhorn showed his work today, I don’t have the slides at my disposal but his points were empirical. But Damon speaks a very simple truth about the brands in question. This is a tough one.

More about Damon Vickers here:


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Notes from the Value Investing Congress: Einhorn Edition (TRB)

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