Due to industry regulations, large investment firms must disclose their portfolios every quarter. This is a gold mine for retail investors as they can search a large list of holdings to find potential buying opportunities.
Bill AckmanA billionaire hedge fund manager who runs Pershing Square Capital Management, he is a popular investor to watch. His firm had a 13% stake in a thriving company as of September 30 of last year, a position Ackman has held since 2016.
this top restaurant stock It has skyrocketed 91% in the last two years alone. Is it time to buy stocks?
Ackman’s investment philosophy is based on owning companies with competitive advantages that possess numerous positive traits that benefit investors over the long term. It also tends to focus on consumer-facing companies.
Get into Chipotle Mexican Grill (NYSE: CMG)the Tex-Mex pioneer known for its fast service, simple menu and consistent food. Pershing Square first bought a stake in 2016, which was a contrarian move given that Chipotle was still dealing with the aftermath of a scary E. coli outbreak at some of its restaurants.
However, that bet paid off. One of the reasons is due to growth. Chipotle’s third-quarter 2024 revenue of $2.8 billion was 100% higher than the same period five years earlier. That is a clear sign of its popularity among consumers.
What’s more, having a sizable revenue base gives Chipotle some cost advantages. This is particularly true when purchasing key food inputs, spending on marketing and technology investments that can be leveraged in a growing store, and when trying to acquire attractive real estate.
In addition to constant robustness same store sales increases that defy industry norms, unsurprisingly, this revenue increase is also driven by new store openings. Chipotle is expected to have opened 300 net new locations last year, bringing the total number to more than 3,700. The business is on track to one day reach 7,000 stores in North America, which is management’s explicit long-term goal.
It’s safe to assume that based on the trajectory Chipotle has been on, reaching that goal is a realistic outcome. That could lead to revenue growth for many years.
The problem for new investors is that Chipotle’s monstrous success is no secret. The stock continues to rise, leading to a lofty valuation. The shares are currently trading at a price-earnings ratio (P/E) 54 years old, more than double that of S&P 500.
Some investors might be totally fine paying that rich valuation for what they consider a high-quality business. As mentioned above, Chipotle’s growth has been magnificent. And it’s definitely easy to believe that this will continue for years to come. This business is also extremely profitable, with an operating margin of 16.9% in the third quarter. That figure is higher than the 8.2% in the third quarter of 2019.