Active Bear ETF Looks to Take a Bite out of Chipotle

The AdvisorShares Ranger Equity Bear ETF (NYSEArca: HDGE), which is subadvised by Ranger Alternative Management, does not shy away from shorting high-flying, glamorous stocks.

The actively managed ETF’s current roster of short positions includes fast-casual burrito purveyor Chipotle Mexican Grill (NYSE: CMG), a stock that has recently punished those that dare bet against it. Over the past two years, shares of Chipotle have more than doubled, rising 109% while outperforming the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY) by better than two-to-one. [Consumer Discretionary ETFs Standout]

Chipotle’s stellar run is not scaring HDGE manager Brad Lamensdorf. While he lauded Chipotle’s management team in an interview with Yahoo Finance, Lamensdorf said, “Our feeling has been that, while they’ve done a great job, the stock is completely priced for perfection.”

Although the consumer discretionary sector is one of the most richly valued sectors relative to the S&P 500 (XLY’s P/E ratio is nearly 20 compared to about 17 for the S&P 500), Chipotle’s trailing P/E is almost 47 with a price-to-book value of nearly 10.4.

“Lamensdorf believes a multiple of 25 to 30 times earnings would be more appropriate — at 30 times, the stock would trade for $424,” according to Yahoo Finance.

A $424 handle for Chipotle is nearly $250 below, or 59%, below where the stock closed Wednesday. Lamemsdorf acknowledged to Yahoo Finance that Chipolte is “an example of a great company and a dangerous stock.”