Due to industry regulations, large investment firms are required to disclose their portfolio holdings every quarter. This is a goldmine for individual investors, as they can search through a large list of positions to find potential buying opportunities.
Bill Ackmanthe billionaire hedge fund manager who runs Pershing Square Capital Management, is a popular investor to keep an eye on. His company owned a 13% stake in the thriving company as of September 30 of last year, a position Ackman has held since 2016.
This summit Restaurant inventory It’s up 91% just in the last two years. Is it time to buy stocks?
Ackman’s investment philosophy is based on owning companies with competitive advantages that possess many positive attributes that benefit long-term investors. It also tends to focus on consumer-facing companies.
He enters Chipotle Mexican Grill (NYSE: CMG)a leading Tex-Mex company known for its quick service, simple menu, and consistent food. Pershing Square first bought a stake in 2016, a contradictory move given that Chipotle was still dealing with the aftermath of a scary E. coli outbreak at some of its restaurants.
However, this bet worked out well. One reason is growth. Chipotle’s third-quarter 2024 revenue of $2.8 billion was 100% higher than in the same period five years ago. This is a clear sign of its popularity among consumers.
Furthermore, having a large revenue base gives Chipotle some cost advantages. This is especially true when purchasing key food inputs, spending on marketing and technology investments that can be leveraged through store expansion, and when trying to acquire attractive real estate.
Along with constant power Same store sales Increases that defy industry standards Unsurprisingly, this higher gain was also driven by new store openings. Chipotle is expected to have opened 300 new locations in the past year, bringing the total to more than 3,700. The business is on track to one day reach 7,000 stores in North America, which is management’s obvious long-term goal.
It’s safe to assume that based on the path Chipotle has taken, reaching this goal is a realistic outcome. This may lead to revenue growth over many years.
The problem for new investors is that Chipotle’s massive success is no secret. The stock continues to rise, leading to a steep valuation. The stock is currently trading at Price to earnings ratio (P/E). Of 54, more than double that of Standard & Poor’s 500.
Some investors may be perfectly fine paying such a rich valuation for what they consider a high-quality business. As mentioned earlier, Chipotle’s growth has been impressive. It is certainly easy to believe that this will continue in the coming years. This business is also very profitable, boasting an operating margin of 16.9% in the third quarter. This number is up from 8.2% in the third quarter of 2019.
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