4. Chipotle Mexican Grill, Inc. (NYSE: CMG)
Number of Hedge Fund Holders: 41
Chipotle Mexican Grill, Inc. (NYSE: CMG) is placed fourth on our list of 15 best Jim Cramer stocks to buy now. The stock has offered investors returns exceeding 39% over the course of the past year. The company runs a chain of restaurants around the world. In April, while discussing the stock on his show, Cramer highlighted the pandemic business of Chipotle and the market share captured through a shift to digitization, a crucial factor that would lead to the stock soaring as the economy reopened with fewer restaurants operational compared to 2020.
On July 14, investment advisory Wells Fargo raised the price target on Chipotle Mexican Grill, Inc. (NYSE: CMG) stock to $1,780 from $1,720 and maintained an Outperform rating, backing the firm to deliver to investors as it prepares to post quarterly results.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Pershing Square is a leading shareholder in Chipotle Mexican Grill, Inc. (NYSE: CMG) with 1 million shares worth more than $1.5 billion.
In its Q4 2020 investor letter, Pershing Square, an asset management firm, highlighted a few stocks and Chipotle Mexican Grill, Inc. (NYSE: CMG) was one of them. Here is what the fund said:
“Chipotle’s superb 2020 performance amid a challenging backdrop was due to the successful business transformation led by CEO Brian Niccol and his team. Improved digital access, which has been a pillar of management’s transformation strategy and a growing sales driver in recent years, enabled the company to serve customers with digital pickup and delivery as the pandemic began. Only three months after the onset of COVID-19 in the U.S., Chipotle returned to growth, achieving same-store sales growth of 6% in Q4, or 20% over two years.
The pandemic accelerated a shift in the company’s digital sales mix from just under 20% of sales at the end of 2019 to 70% in April, before settling to about 50% in July, a level which has been maintained through the start of 2021. Management believes that the majority of these digital sales are incremental, noting that in the 60% of stores with dining rooms open, 80% to 85% of digital sales gains are being retained while 50% to 60% of in-store sales have been recovered.
Management remains confident that the company will emerge even stronger from the COVID-19 pandemic as it continues to execute on a number of long-term strategic initiatives. Chipotle plans to open 200 new restaurants in 2021, a 24% increase from 2020 opening levels, with more than 70% of these new locations featuring a Chipotlane, the company’s high-return, digital drive-thru format.
Chipotle has already launched two new menu innovations in 2021, including cauliflower rice, which was introduced in January and has garnered very favorable early feedback, and the much-anticipated quesadilla, which was launched as a digital-only menu item on March 11th. Chipotle Rewards, a highly effective marketing tool for the company, continues to see enrollment growth with over 19.5 million members as of year-end, compared to 8.5 million members at the end of 2019.
Chipotle is extremely well positioned to execute on the company’s long-term strategy, which should drive substantial shareholder value in the future.”
