Jeffrey Gundlach: I’d short Chipotle at $380 and avoid everything Apple

Famed bond investor Jeffrey Gundlach of DoubleLine Capital went on Reuters TV Friday to discuss the 10-year Treasury (he’s a buyer above 2%), Fed policy, Japan, U.S. stocks (“the case is that it’s the best game in town – but if quantitative easing is your reason, Japan is even better”), his silver holding and sundry other topics having to do with this extraordinary low yield environment – including the danger of buying a house as investment right now.

Here’s the full interview:

On individual stocks, he followed up on speculation that he’s short Chipotle:

Well, I’m not really short Chipotle. I think it’s a great time to short it though. I’m actually looking at a $380 price. It might get there today, I don’t know, but it hasn’t gotten there recently. That’s like the perfect price to short it at, and at that price I think I’ll come in and do it. I think this price of Chipotle is remarkably high versus their earnings. It’s a 40 P/E for a company that has good products – I like their products, I go there. I’m not an anti-Chipotle’s products. But I think that there seem to be lines out the door and very saturated and that means where’s the growth going to come from? If you’re pushing out maximum volume with lines out the door and you’ve expanded your store count to be almost ubiquitous, then where are you going to go from there? I have a hard time seeing why the P/E is supposed to be 40 for a stock, a company that’s more mature now than it used to be.

On Apple’s newly issued bonds:

Apple’s corporate bonds? Yeah. Not really. They don’t yield very much. They’re super safe. I mean, Apple is like a cashflow machine. You know, I kind of like Apple these days just as a trade. I think it’s formed a base. The P/E, when you strip the cash out, is really pretty low. The P/E on the business is 7 or lower depending what day you look at it. That’s pretty low. And now it’s a mature business, they’re having challenges with product innovation, but they’re a cashflow machine. I think I’d rather own Apple stock than Apple bonds.

But not really:

Yeah, I don’t like [Apple] long-term. I think Apple’s stock may stay around $500. Maybe now and then it goes into the $300’s, but it could stay there for years. It’s kind of like the new Microsoft where the company is very big, lots of cashflow, but what’s next? And we don’t know what’s next for Apple.

He likes stocks exposed to the stronger housing market, and finds Steve Eisman’s thesis for Ocwen (OCN) to be particularly compelling.