No, I don't mean the title of this blog post in the way you are probably thinking -- I'm not feeling ill, my stomach is not upset.
But, it's looking more and more like I'm losing a dinner bet.
For those of you who may not have followed my CAPS project from a while back, in 2007 I launched a stock-picking blog called Eldrehad's Picks in which I built a long-only porfolio in CAPS with detailed write-ups for each month's pick. Other priorites surfaced in my life so I let the blog go dormant, but over all, I'm pleased with the performance (and learned a lot from the exercise). If you're interested, the link is below, but of course all of the analysis is a bit dated by now.
What does this have to do with losing dinner?
Well, my inaugural pick for this blog was Red Robin Gourmet Burgers (RRGB). A pick which immediately garnered a fair amount of criticism (deservedly so) from a few of my fellow Fools. The most vocal of my critics was TMFBent, who voiced his concerns with my pick in his blog.
At that time, Seth (TMFBent) was long on Chipotle Mexican Grill (specifically the class B shares), while I was a Chipotle skeptic (thinking the valuation at the time far too rich). So, we bet dinner -- a three year race between Red Robin and Chipotle (per comments on Seth's blog below).
I can bet dinner, but this is a better bet, IMO. 3 years, CMG.b against RRGB, winner eats free at the restaurant of his choice.
(One year is just noise...)
Not beat Chipotle in a milion years? Pretty strong words my friend - you're on! I think Chipotle's multiple is wickedly rich.
So, use last night's close as the starting point? CMG-B at $91.82 vs. RRGB at $39,14, for three years (close as of 8/21/10)?
Looking forward to the race!
Now, I don't know if Seth (or anyone else anywhere in CAPS) remembers that little bet, but I do. How's it going so far? Well, as you can probably tell from the blog title, not so well for me. Last December, the CMG-B shares were retired and exchanged for the class A shares on a one-for-one basis -- and currently trade for $133.97 per stub. I didn't look into dividends, but there haven't been any splits, so a 46% gain for Seth in three years (not bad considering the downturn that's happened in the market since). RRGB, on the other hand, is currently trading for $20.66 per stub, so a 47% loss for yours truly. Ouch!
Unless Red Robin goes on an absolute tear, or Chipotle completely implodes, or a combination of both (which need to happen in the next month -- unlikely), the handwriting is on the wall.
And I don't mind.
The fact is, this is the kind of thing that CAPS is all about. No, not making dinner bets, but having intelligent people voice their opinions on stocks and investments, being accountable for their picks, and learning from each other -- and I've learned an awful lot from Seth along the way -- the value of which far exeeds the cost of a meal.
As I write this, I am remembering how it felt back then -- my first pick drawing a bit of fire from one of the Fools I admired most in CAPS. It was a little tough to swallow, seeing as this was a new endeavor for me (posting picks with detailed blog write-ups in this fashion). One thing I did endeavor to do, however, was to be a bit more selective in the picks that followed -- something which I think paid of handsomely in both the performance of the picks and how much I personally learned as an investor in the process.
So... I lost dinner, or am about to -- but I gained so much, from not only that exchange with Seth, but from CAPS as a whole. Maybe one of these days I'll reopen Eldrehad's Picks (I gave it a shot about a year ago, but other priorities got in my way again), but even if I don't, I am a far richer person for having done it.
So, Seth, if you happen to stumble onto my blog, I haven't forgotten -- and when the 21st of August rolls around, I'll shoot you an e-mail to make arrangements to send a Chipotle Mexican Grill gift card your way. Thank you for everything I have learned from you over the years.
Russell (a.k.a. TMFEldrehad)
P.S. I own no shares in either CMG or RRGB