Today David Einhorn spoke at the Value Investing Congress. In his presentation he made a bullish case for General Motors (GM). This is a company that we at T&T Capital Management (TTCM) have been very bullish about, and we feel that it is misunderstood coming out of bankruptcy. GM has much lower production costs now and the company is competitive globally. The company is extremely strong in Brazil and China where growth should continue over the next decade. While pension obligations are a concern, the company has time and is likely to post robust profits over the next several years, which will give it the ammunition to reduce the deficit. It is a shame that the company didn’t sell Opel a couple of years ago, as I don’t believe the company will be able to be profitable over the next several years. As an investor that is long GM I hope that I am long. In terms of Chipotle (CMG), the valuation is certainly a stretch and I agree that the company is facing increased competition. Because CMG owns its stores, one potential lever that it can pull is to begin a franchising model, which would be valued at a higher multiple due to higher returns on invested capital. There isn’t much of a point in doing that right now though as the company doesn’t need to increase its valuation, but instead it just needs to continue to execute. Einhorn is a very intelligent guy that I respect a lot, but investors certainly should do their own research as well.
INVESTING IN THE FINANCIAL MARKETS INVOLVES RISKS. OPTIONS ARE NOT SUITABLE FOR ALL INVESTORS.