Are Volkswagen AG and Chipotle Mexican Grill Attractive Short Term Trades?

While I normally take the long view when it comes to choosing stocks, sometimes short-term weaknesses in otherwise solid companies prompt me to think about a short term trade.

The Volkswagen AG emissions debacle and current E. Coli outbreak with Chipotle Mexican Grill which has sent investors fleeing from these stocks may be such opportunities.

Most investors would agree that while the diesel emissions scandal is significant and will be costly to rectify (both in term of money, negative press etc.), it is not likely the death knell for the massive Volkswagen AG. The Company has significant financial resources to weather the current storm and has already undertaken further cost-cutting initiatives and put new blood in the C-suite in an attempt to steer the Company through one of the most tumultuous times in its history. Volkswagen AG ordinary shares are down about 25% for the year.

Shares in Chipotle Mexican Grill dropped 12% on Friday (YTD: -12.75%) after the CDC reported several new cases of E. Coli had been connected to the fast-growing restaurant chain. While the fall has not been as drastic as that of Volkswagen, many see the unfortunate E. Coli situation as manageable and the Company should soon be back on track. A similar E. Coli situation occurred at the Jack in the Box (NYSE: JACK) restaurant chain in 1993 and while quarterly sales in the period the news broke dropped sharply, the following year saw comp sales rise modestly and now JACK seems to be back in shape.

Do you think Volkswagen AG and Chipotle Mexican Grill are attractive from a short-term trading point of view?

 

 

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