In Q1, Ken Griffin’s Citadel Advisors purchased nearly 1.3 million shares of health-oriented QSR Sweetgreen (NYSE:SG), adding to a position that previously stood at only about 336,000 shares.
While small by Citadel’s standards, this purchase of a deeply embattled restaurant stock is both interesting and somewhat unusual for Griffin.
Why did Ken Griffin buy Sweetgreen, and could the stock still be worth looking at for investors at the moment?
Griffin’s Investment Strategy
Ken Griffin uses an interesting investment strategy that focuses on careful risk management and capital preservation while at the same time taking advantage of undervalued opportunities when they spring up. Griffin’s approach tends to be highly mathematical and data-driven, something that differentiates him from fundamental-driven value investors like Warren Buffett.
Citadel also uses a market-neutral approach that aims to generate returns in a range of different market conditions.
Where Does Sweetgreen Fit In?
At first, Sweetgreen may seem an odd choice for Ken Griffin’s portfolio. The largest holdings at Citadel are mostly large businesses like Charles Schwab, Hess and Home Depot. Griffin also has about 1.1% of the portfolio allocated to the QQQ ETF, which delivers exposure to high-growth tech firms. Looking at these top holdings, a pre-profitability restaurant chain doesn’t immediately appear to fit in.
Sweetgreen does, however, make a bit of sense when one considers Griffin’s quantitative approach to investing. SG shares have sold off by nearly 60% in the last year, bringing the stock’s price-to-sales ratio down to its lowest point since the end of 2023. Even today, Sweetgreen is trading toward the bottom of its very wide 52-week range.
Here, it’s worth noting that Sweetgreen appeared significantly overvalued for quite some time. In the second half of last year, SG’s price-to-sales ratio hit about 6.0. Even for a growing restaurant chain, this ratio appeared quite high. As such, it’s likely fair to attribute some of Sweetgreen’s drop this year to the market repricing the stock at a more reasonable level.
We also have to consider Sweetgreen’s performance and potential for forward growth. In Q4 2024, Sweetgreen reported a 5% increase in revenues to a quarterly total of $160.9 million. AUV, meanwhile, stayed steady at $2.9 million. The revenue growth rate kept going at a fairly similar pace in Q1, which saw a year-over-year increase of 5.4%. One major negative in the Q1 report, however, was the fact that Sweetgreen’s same-store sales dropped by 3.1%.
Perhaps the largest deciding factor for Griffin’s interest in Sweetgreen, though, is its use of innovative technology that could allow it to grow at a rapid rate. In addition to making heavy use of digital ordering, Sweetgreen is also rolling out an automated kitchen concept it refers to as the Infinite Kitchen. Using advanced robotics and AI, the Infinite Kitchen promises both improved speed and lower labor costs.
On a somewhat more down-to-earth note, it’s worth taking into account that Sweetgreen is actively profitable at the restaurant level and is expanding into new locations. In 2024, Sweetgreen reported restaurant-level margins of 20% and opened 25 new restaurants. In Q1, this was added to by the opening of a further 5 restaurants. Sweetgreen’s expansion could take time, but the fact that the restaurants themselves are basically profitable opens the door to substantial future growth as the chain builds its footprint.
Griffin’s History With Sweetgreen
It’s also important to note that Citadel’s holdings in Sweetgreen haven’t been linear. Griffin bought heavily in 2023, but then reduced his holdings in 2024 as prices soared.
The buying activity in Q1 was the largest addition to the fund’s Sweetgreen stake in over a year, potentially indicating that Griffin saw renewed value in SG as its share prices dipped on slowing performance.
As such, it’s likely that Griffin sees Sweetgreen as a considerably better stock to buy now than he did through most of last year.
Is Griffin Alone on Backing SG?
Ken Griffin isn’t the only one who seems to see upside in Sweetgreen. Starting with analyst price forecasts, the consensus price target of $23.27 is more than 70% above the stock’s current price of $13.56. Despite an even split between buy and hold ratings, no analysts are currently rating Sweetgreen as a sell.
Perhaps even more telling is the fact that institutional investors started buying SG at a much brisker pace in January and have kept buying as the year has gone on, closing what had previously been a large gap between institutional buying and selling activity. Even fellow billionaire hedge fund manager Israel Englander has jumped onto Sweetgreen alongside Griffin, adding about 2.2 million shares to his own stake in Q1.
Why Did Ken Griffin Buy Sweetgreen?
Griffin appears to have bought Sweetgreen primarily because of the extremely sharp dip in its share prices, which may have been an overreaction to a period of somewhat slow revenue growth.
With the trend of healthier eating remaining popular and the business still expanding its footprint, Griffin likely reasoned that SG shares had sold off too extremely and would, as a consequence, eventually correct back upward.
With that said, Griffin has kept his holdings in Sweetgreen fairly modest. The SG stake was valued at only a little over $40 million as of the end of Q1, compared to the more than $100 billion in assets Citadel has under management. So, while Griffin and his team clearly see upside potential in Sweetgreen, their exposure to the stock remains very small.
Right now, SG shares are still deeply sold off, creating a possible entry point for risk-tolerant investors. Sweetgreen could face headwinds from both higher tariff costs and slower consumer spending, neither of which will likely do its sales any favors.
In the long run, though, the tailwinds behind the business could prove stronger than the temporary headwinds. With shares selling for significantly less than their recent historic P/S average, it’s possible that SG could rally and regain some of the ground it has lost.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.