Hedge fund titan David Einhorn has been on fire in recent years with his bearish calls (Lehman Brothers, St Joe, Green Mountain, etc) and his latest presentation at the Value Investing Congress detailed a negative outlook for Mexican fast casual restaurant chain Chipotle Mexican Grill (CMG). Some of his points on CMG were easier to agree with (sky-high valuation, slowing growth, pricing pressures) than others (a strong competitive threat from Taco Bell?) but he nailed another one of his calls. CMG shares are falling $30 today after the company reported a disappointing quarter last night. The stock now sits just above $250, down from a high of $442 hit in April of this year.

Chipotle stock long surpassed any level that I consider a good value, but as its recent descent continues, it makes sense to at least pinpoint a price at which it might warrant consideration on the long side. After all, the company still has a very attractive longer term unit growth outlook, is likely to remain very popular with consumers, and the company sports one of the highest operating margins I have ever seen generated by a restaurant company (27% unit-level operating margins).

The reasons for the stock’s decline lately are completely justified even though they don’t really impact the long-term business outlook for the company. The valuation was crazy before (at $442 per share it traded at a 50 forward P/E ratio) and comp sales growth of high single digits or more was definitely not sustainable  Yesterday the company offered 2013 guidance of 12% unit growth and indicated comps could be flat. While such an outlook will hurt shares short term, longer term it is not terribly worrisome.

With the stock now down more than 40% from its high, I do not think it is far off from a fair price, though it is not quite there yet. If the shares fell to around the $225 level, which equates to about 12 times cash flow, I would start to get interested. This is definitely one growth company to watch, as negative business momentum short term could very well send the stock down to value territory if investors’ disappointment continues.

Kudos to David Einhorn for another timely call. I would never suggest investors’ blindly follow any investor, but Einhorn is clearly one of the best around right now and it worth paying attention to when he gives public presentations. We can all learn a lot from him.

Full Disclosure: No position in any of the companies mentioned at the time of writing, but positions may change at any time

With the S&P 500 piercing through the 1,400 level for the first time since the recession, it is getting harder for value investors to find bargains. Consumer-oriented growth stocks, in particular, have seen their share prices and valuations soar during the current bull market. Restaurants like Chipotle Mexican Grill (CMG) and Panera Bread (PNRA) as well as clothing companies like Lululemon (LULU) and UnderArmour (UA) have become market darlings, with P/E ratios stretching into the 30′s, 40′s and even 50′s. Bargain seekers need to dig deeper to find attractive stocks if they want to avoid paying 2-3 times market multiples for their stocks.

An interesting dichotomy has arisen in the beverage space, which to me is a great illustration of how the bull market has played out in recent months. A blue chip beverage company like Dr Pepper Snapple Group (DPS) has lagged in the recent market rally, whereas the smaller, faster growing Monster Beverage Corp (MNST) has soared. In fact, despite being three times the size of Monster in terms of sales, Dr Pepper Snapple is actually valued at more than $2 billion less on the public market. Below is an interesting comparison of the two companies and their stocks.

Now, given that MNST is a smaller company and as a result is growing faster, I would not argue it should not trade at a premium to DPS, but this much of a premium seems a bit out of whack. If I was investing in a set of brands, I would choose DPS in a heartbeat. And the fact that I could get three times the revenue for a cheaper price would be icing on the cake.

In this current market, I suspect MNST shares are overvalued and DPS is undervalued. The energy drink market is growing faster and is more of an exciting growth story for investors, whereas the DPS brands, while prolific, only grow at the rate of GDP globally. As I try to find bargains in an overbought (my personal view) stock market, I am gravitating towards stocks like DPS. Not only do they look fairly inexpensive on a valuation and brand equity basis, but the value is even more apparent when they are compared with some of today’s hottest consumer companies.

Full Disclosure: Long DPS and no positions in CMG, MNST, LULU, PNRA, or UA at the time of writing, but positions may change at any time