2. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Holders as of Q2: 68
Pershing Square’s Equity Stake: $1.81 Billion
Chipotle Mexican Grill, Inc. (NYSE:CMG) has been one of the biggest holdings in Bill Ackman’s stock portfolio since 2016 as the legendary investor acquired stakes, taking advantage of a foodborne illness that pushed the stock down by 50%. He currently owns 28.82 million shares in the company.
While the stock has pulled back significantly from its 52-week high, it remains a solid pick in the restaurant sector. The company has made a name in the growing niche between cheaper fast-food chains and pricier restaurants.
By improving its mobile app, growing its rewards program, and introducing new grab-and-go ordering options, Chipotle Mexican Grill, Inc. (NYSE:CMG) has hit new levels of revenue and earnings growth. Chipotle gathered more customer data using analytics tools, allowing it to improve the menu and run more successful marketing campaigns.
In addition, it stopped offering steep discounts and promotions initially intended to win back customers following its outbreaks of foodborne illness. Instead, it invested its money in new digital, social media, and television advertising campaigns. Because of this, Chipotle Mexican Grill, Inc. (NYSE:CMG)’s comps growth has been positive over the last six years, and it has continuously increased its operating margins at the restaurant level while opening new locations. Additionally, it has raised prices frequently and added new drive-thru Chipotles to accommodate more customers and counteract the inflationary headwinds of the previous two years.
Chipotle Mexican Grill, Inc. (NYSE:CMG) defies the trend of most retail businesses operating on extremely narrow profit margins, particularly restaurants. The operating margin was a fantastic 15.8% last year. Profitability has been aided by pricing power and careful expense management. Even though the stock trades at a premium with a price-to-earnings multiple of 42, the company is expected to grow at an impressive rate.
As of the end of the second quarter of 2024, 68 hedge funds had stakes in Chipotle Mexican Grill, Inc. (NYSE:CMG). Bill Ackman’s Pershing Square is the largest stakeholder of the company, with 28.82 million shares worth $1.81 billion.
Here is what Pershing Square Holdings said about Chipotle Mexican Grill, Inc. (NYSE:CMG) in its Q2 2024 investor letter:
“On August 13th, Chipotle Mexican Grill, Inc. (NYSE:CMG) announced that CEO Brian Niccol would be leaving the company to become the CEO of Starbucks. Brian has led a superb turnaround at Chipotle, which has put the company firmly on the path of sustainable long-term growth. While we are disappointed to see Brian go, one of the measures of a great CEO is the company that he leaves behind. Brian has built an extraordinary team at Chipotle that we expect will not lose a step in his departure. We are grateful to Brian for the extraordinary value he has created for CMG shareholders and Pershing Square.
Chipotle delivered outstanding results in the first half of 2024 as the brand’s industry-leading value proposition of fresh food, customization, and convenience at fair prices continues to resonate with customers. During the second quarter, same-store sales grew an impressive 11%, or 55% from 2019 levels. Successful marketing, including the return of the fan-favorite Chicken Al Pastor limited time offering, and faster throughput drove transaction growth of over 8%, with gains across all income cohorts. Although sales growth has moderated in the summer amid a broader deceleration in the restaurant industry, Chipotle continues to gain share. The launch of Smoked Brisket for a limited time starting in September, one of the company’s most requested menu items, should further improve trends….” (Click here to read the full text)
