Is it time to buy?
Due to industry regulations, large investment companies are required to disclose their portfolio holdings on a quarterly basis. This is a goldmine for retail investors, as they can look for large positions to find buying opportunities.
Bill AckmanThe billionaire hedge fund manager, who runs Pershing Square Capital Management, is a famous investor to follow. His firm had a 13% stake in the company as of September 30 last year, a position Ackman has owned since 2016.
This above Restaurant inventory It has seen a growth of 91 percent in the last two years. Is it time to buy stocks?
Ackman’s investment philosophy is based on holding competitive businesses that have multiple positive attributes that benefit long-term investors. It also focuses on consumer-facing enterprises.
Enter Chipotle Mexican Grill (NYSE: CMG )a Tex-Mex pioneer known for its quick service, simple menu and consistent cuisine. Pershing Square first bought a stake in 2016, when Chipotle was still reeling from the dreaded E.
However, that bet paid off pretty well. One reason is due to growth. Chipotle’s Q3 2024 revenue of $2.8 billion is up 100% from the same period five years ago. This is a clear sign of its popularity among consumers.
Moreover, having a large revenue base gives Chipotle some cost advantages. This is especially true when purchasing key food ingredients, spending on marketing and technology investments in store footprints, and trying to acquire attractive real estate.
Side by side constantly strong Same store sales Added to breaking industry norms, unsurprisingly, this top-line profit is boosted by new store openings. Chipotle is expected to open 300 net new locations last year, bringing its total count to more than 3,700. The business is on track to one day reach 7,000 stores in North America, a clear long-term target of management.
Based on the direction Chipotle has been on, it’s safe to assume that reaching a goal is a real result. This can lead to multiple years of revenue growth.
The problem for new investors is that Chipotle’s monster success is not a secret. The stock continues to climb higher, leading to higher valuations. Shares are currently traded in a Price-to-earnings (P/E) ratio 54, more than double S&P 500.
Some investors may be perfectly fine paying that rich price for what they believe is a high-quality business. As mentioned earlier, Chipotle’s growth has been tremendous. And it’s easy to believe that this will continue in the coming years. This business is extremely profitable, boasting a 16.9% operating margin in Q3. This figure is up from 8.2% in the third quarter of 2019.
