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Collecting a Great Franchise in Chipotle

The old adage buy-low-sell high is a staple with stock investing. But it really doesn’t work, at least with me. Here’s why. When I look at companies to invest in, I scan more than 6000 stocks searching for the top 100, then invest in the top 25-50. By the time I’ve whittled the list down, I’m looking at some of the best stocks of our generation. Picking between them. It’s like looking a the top players in College Football and trying to assess which will be the top players in the NFL.

CMG_2013_Q1I bought low and sold high on Chipotle (CMG). I purchased it for the Growth Portfolio on 7/27/09 at $96 and sold on 2/20/13 at $312. Here’s the one-year chart from 2/11/13:

CMG was selling for a loftly 32x earnings, much higher than the estimates long term growth rate of 21%. With 8% profit growth the last qtr and that same growth expected the next 2 qtrs I felt I bought low and sold high.

That was until the stock started trending higher, and higher, and eventually was back to kicking out +20% with a 40-plus P/E. Chipotle was a great player in college, even better in the pros, and went on to become a Hall of Famer. This shouldn’t have been a surprise, as it was the best quick service franchise both then and now.

CMG_2015_Q4_PHLuckily for us CMG gave us another opportunity to buy low. This month CMG fell to $540 on an E. coli scare, and I’m getting back in. This time we buy-and-hold, and become a collector of amazing franchises. I last reviewed CMG on 10/26 when the stock was $650, here is the Profit History Table:

Chipotle will be purchased for the Growth Stock Portfolio and will rank 18th of 32 stocks in the Power Rankings.

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