As I take everything into consideration with Chipotle Mexican Grill, Inc. (NYSE:CMG), I can’t help but come to the conclusion that it’s grossly overvalued at current levels. It does have the benefit of catering to healthier casual dining consumers who appreciate that their meat isn’t laden with unnecessary antibiotics. Then again, Chipotle Mexican Grill, Inc. (NYSE:CMG) is walking a very thin tightrope of not raising prices in order to keep customers from being driven to competitors. It shunned boosting prices last year and its margins have suffered because of it.
Until taxpayers become more acclimated with their smaller spending budgets due to higher taxes, and Chipotle comes to terms with the fact that pricing power is its best friend, I’d suggest looking at this from a short-selling standpoint.
Canadian National Railway (USA) (NYSE:CNI)
Once more the theme is an earnings-driven event. Canadian National Railway (USA) (NYSE:CNI), known as CN, is a railroad company to the north that delivered net income of $541 million in the first quarter compared to the $755 million it reported in profits in the year-ago period. Despite tougher weather conditions being one of the primary factors for the volume shortfall, investors still came down on Canadian National.
However, I see CN as a sneaky oil and bitumen transport play from the oil-heavy Bakken formation. One-trick drillers like Continental Resources, Inc. (NYSE:CLR) have been utilizing its shipping their oil by rail past Cushing, Okla., to Louisiana terminals and netting the difference between the higher Brent crude price as compared to the West Texas Intermediate price after shipping costs. Continental is currently shipping 65% of its oil production in the Bakken this way, proving it’s obviously a profitable venture.
Similarly, CN can be viewed as a prime transporter of oil and bitumen into various regions of Canada. As the U.S. looks to beef up its energy reserves, you can expect oil production, especially in the oil-rich Bakken, to increase, only furthering the need for transport by rail. We obviously can’t predict the impact of weather on CN’s operations, but the demand for its services is bound to remain strong for decades to come.
The article 3 Stocks to Get on Your Watchlist originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Apple and Chipotle Mexican Grill. It also recommends Canadian National Railway.
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