Chipotle Mexican Grill, Inc. (CMG)

66Champs (40.85) Submitted: 1/21/07 12:02 PM : Start Price: $51.00 CMG Score: 40.72

While I fully recognize that it can be dangerous to paraphrase and interpret the thoughts of those who are far smarter, this is looking like a classic Peter Lynch "buy-what-you-know" growth story to me. It carries a high multiple (currently PE around 50) but continually smashes earnings estimates. In thirteen years, they've grown from 1 store to 500+. Adding right about a hundred stores a year right now. They have an absolute cult-like following. Insane brand loyalty. I've eaten at 20+ locatations in 10+ markets in diverse, geograpically separated states, and this place is an absolute dynamo at lunch AND dinner all across the country, with steady a stream of business at the so-called "off hours" in the middle of the afternoon, etc. It's a lot like Starbuck's in the sense that the business is built around a distinctive, superior product, but the experience is as much about the buzz and vibe of the place as it is the food. They play hip music that's ahead of the trends, and have a chainwide aluminum and wood interior design motif that's cool and rugged but not costly. The Chipotle experience was created around a "college crowd" following, but it's a phenomenon with the business folks in the nation's great downtowns. They're getting into wonderful non-traditional fast-food locations because they don't do drive-throughs. I know, I know, drive-throughs are how fast food exploded. They were a wonderful innovation. But waiting in an exhaust-fume laden line of cars is NOT part of the Chipotle experience. So they're pioneering new ways to faciliate take out with "go to the head of the line" fax and and email orders. Ka-ching. The public accepts it in a big way. The balance sheet is beautiful. They have innovative management training concepts, with an eye toward motivating successful store managers to stay in stores longer (rather that moving up to some regional office). The brand management is superior. The experience is remarkably consistent from location to location. Etc. I haven't a clue what the stock will do in the next year or so. Bears would say the multiple's just too high, the corporate excellence is already priced in, and some air needs to come out of the balloon. Fine, that's great, but if you have a 5-10 year window and new resources to average down with if the pps does drop (which it may well not), this one is my very, very best pick. Unless CMG-B is still trading below CMG. That's another story. I've written a brief summary of those dynamics under that pick, which was an easy way to double my bet for CAPS purposes.

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