We recently compiled a list of the Jim Cramer Discussed These 11 Restaurants and Retail Stocks. In this article, we are going to take a look at where Chipotle Mexican Grill, Inc. (NYSE:CMG) stands against the other restaurant and retail stocks Jim Cramer recently talked about.
Jim Cramer, the host of Mad Money, recently took a closer look at the state of the consumer, focusing on restaurants and retailers to understand the broader economic picture. According to Cramer, there is a common misconception about the economy, where people tend to think of the consumer as one homogenous group. He pointed out that there isn’t a single consumer whose behavior can explain the overall economic trends. Instead, Cramer identified two distinct types of consumers in today’s market.
“One consumer’s going out looking for absolute bargains. The other consumer’s looking for what I call “premium value” or “value at a price”. More expensive, but relative to similar offerings, you get a great deal.”
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This conclusion came after Cramer listened to a variety of retail and restaurant earnings calls. He expressed skepticism about relying on broad aggregate data, such as national retail sales, which he believes doesn’t capture the full picture. Instead, Cramer prefers analyzing individual companies, piecing together information from different sources to form a clearer sense of the consumer landscape. He believes this approach provides a more accurate snapshot than relying on overarching statistics.
Cramer also noted that the rise of these two different consumer types has perplexed Wall Street. In the past, there was typically one consumer who either spent or didn’t, but that has changed. Now, there are two groups of consumers, each spending in different places.
In his conclusion, Cramer urged investors to stop focusing on whether consumers are struggling financially or facing challenges. The key, he said, is understanding choice.
“The bottom line: Stop trying to figure out if the consumer’s cash strapped. Forget the headwinds. What matters is choice. Right now, consumers are lapping up absolute value at the lowest price or premium value, meaning better stuff that’s a good deal versus the competition. But everything else? Maybe not so much. Hence why the aggregate numbers just don’t tell the story.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on December 19. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A chef plating up a wide variety of dishes for a restaurant chain.
Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Holders: 69
Cramer noted that Chipotle Mexican Grill, Inc. (NYSE:CMG) is popular because people know they can split a single meal into two, making it a cost-effective option.
“Now there are some straddlers that seem to please everybody like Costco and Chipotle, maybe that’s why their stocks have such high price-to-earnings multiples… Chipotle straddles because everyone knows you can take a Chipotle meal and split it into two. One for lunch, one for dinner.”
Chipotle (NYSE:CMG) operates a popular chain of restaurants that specialize in serving a variety of Mexican-inspired dishes. In response to inflationary pressures, it raised its menu prices for the first time in over a year. The increase, which amounted to approximately 2%, was acknowledged by the company in early December. According to Chipotle’s chief corporate affairs officer, the adjustment was made to help offset rising food costs.
The price increase was noted in an analyst report by Truist Securities, which found that 20% of the company’s surveyed locations had implemented the price hike. In addition to inflation, the company faced higher ingredient costs while addressing concerns raised by customers about shrinking portion sizes. Chipotle’s handling of portion sizes became a contentious issue after viral complaints surfaced on social media platforms like TikTok.
The company was subsequently sued in November 2024 by its shareholders, who claimed that Chipotle (NYSE:CMG) had concealed how many of its restaurants were serving smaller portions. This issue was seen as forcing the chain to spend more on ingredients and negatively impacting its stock price. It should be noted that CEO Scott Boatwright and his predecessor Brian Niccol emphasized the importance of maintaining what they referred to as “generous portions” across all Chipotle locations.
Despite the controversy, the company continues to grow as it reached a significant milestone by opening its 1,000th Chipotlane in November, a digital order pick-up lane designed to streamline the customer experience.
Overall CMG ranks 3rd on our list of the restaurant and retail stocks Jim Cramer recently talked about. While we acknowledge the potential of CMG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CMG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
