I am adding Chipotle Mexican Grill (CMG) to my list of Big Bet Stock Picks as of 11/30/2015 at the price of $580 which is where the stock is trading this morning.

This is a company that has been hit hard in the last five weeks after an E. coli scare was first reported in Washington and Oregon and then spread to an additional four states. The stock has dropped from the mid $750’s to the $580 it now trades at after briefly going as low as $532. 

While E. coli is a very serious threat to any company that sells or distributes food, sometimes investor’s can over react and I believe that to be the case with Chipotle. People let their imaginations get out of control, especially when a company closes down all restaurants in several states as happened in Washington and Oregon. In their imaginations investors see it spreading from state to state and they choose to bail on their stock holdings out of pure fear. 

But briefly closing down restaurants was the responsible thing to do and Chipotle should be commended for it even though it could have been interpreted to mean the problem was more serious than it was. Then, with the additional four states being added to the list, investors took another big chunk out of Chipotle’s market cap.

While there is always risk with stocks, especially in circumstances like this, often times the problem is much less severe than people imagine and the stock moves slowly back up to its old highs. The barrage of news stories about Chipotle and E. coli was enough to push the stock down to a level that any long term investor might consider looking at. Taking advantage of investor’s over reactions is a good way to buy a stock when the low price is indeed an over reaction and not a long term problem. I believe in the case of Chipotle, this will soon blow over and soon be forgotten by the companies loyal patrons.