Bloomin’ Brands Inc (BLMN), Chipotle Mexican Grill, Inc. (CMG): What Does This Insider Selling Mean For Your Restaurant Investment?

Another large restaurant chain is Chipotle Mexican Grill, Inc. (NYSE:CMG). Chipotle has been the target of short interest from some well-known hedge fund managers, including Jeff Gundlach and David Einhorn. Gundlach stated that although he liked the chain’s products, there was no such thing as a gourmet burrito. Despite these recommendations, Chipotle Mexican Grill, Inc. (NYSE:CMG)’s stock is trading at the lofty price of around $366. Although it took a dive in late October, falling down to around $230 a share, it has recovered well and is up over 22% year to date. Chipotle Mexican Grill, Inc. (NYSE:CMG) has a high P/E ratio of around 40. There are currently around 2.8 million shares being shorted. To this point, the company has defied the short naysayers and continues to show strong revenue growth.

The facts indicate that Bloomin’ Brands Inc (NASDAQ:BLMN)’s stock price could be in for a correction after having performed well since its IPO. Insiders are selling heavily, along with an additional secondary stock offering that may flood the market. A lot of the insider selling is due to the end of the lock up period, but with such high volume, it is uncertain how the market can soak up this additional liquidity. Technically, however, the stock is not showing any weakness as of yet. The price is still within a well-defined channel, and has not broken below the bottom support. Investors should wait for a break below the lower support on substantial volume before thinking about shorting the stock.

The article What Does This Insider Selling Mean For Your Restaurant Investment? originally appeared on Fool.com and is written by Mike Thiessen.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill and Darden Restaurants. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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