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

November 29, 2015 The Security Whisperer Commentary Chipotle Mexican Grill, short term profit, short-term opportunity, solid fundamentals, Trading opportunity, Volkswagen AG

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?

The Week That Was

October 4, 2015October 4, 2015 The Security Whisperer Analysis, Commentary CAC 40, Glencore, Volkswagen AG, Weekly Market Recap, Weekly Performance

Concerns over the future of commodity trading and mining giant Glencore dominated the market at the beginning of the week, with the Company’s stock dropping nearly 30% on Monday itself. However, in what appears to be a case of over-pessimism, the stock closed down 2.3% for the week as it began its recovery in earnest on Tuesday.

Lingering commodity fears (and by extension China), disappointing U.S. non-farm payroll numbers, and revisions to prior month data (U.S. jobs and hourly earnings) slowed a market recovery which took hold on Tuesday (both the Dow and S&P 500 finished 1% higher on the week). The fallout from the Volkswagen debacle and aforementioned economic and commodity weakness kept the European indices in the red save for London’s FTSE 100 which posted a modest rise of 0.34%

The French CAC 40 and Japanese NIkkei 225 remain the only two indices in the black on a year-to-date basis.

The Week That Was

September 26, 2015September 26, 2015 The Security Whisperer Analysis, Commentary CAC, Volkswagen AG, Weekly Market Recap, Weekly Performance, Weekly Review

London’s FTSE 100 was the only index to escape last week’s market sell-off. The negative impact from the Volkswagen emissions scandal spread to other automobile (and component) manufacturers which led to the DAX assuming the dubious title of this week’s worst performer. Last week’s large sell-off in the DAX also meant it is now in negative territory on a YTD basis and this leaves France’s CAC 40 and Japan’s Nikkei 225 as the only indices in the black for the year thus far.