Ensemble Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In the letter, the fund discussed why they see so much new value being created in the years ahead, the value that their portfolio of companies is helping to develop. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Ensemble Capital, in its Q3 2021 investor letter, mentioned Chipotle Mexican Grill, Inc. (NYSE: CMG) and discussed its stance on the firm. Chipotle Mexican Grill, Inc. is a Newport Beach, California-based restaurant company with a $51.7 billion market capitalization. CMG delivered a 32.72% return since the beginning of the year, while its 12-month returns are up by 37.80%. The stock closed at $1,830.93 per share on October 15, 2021.
Here is what Ensemble Capital has to say about Chipotle Mexican Grill, Inc. in its Q3 2021 investor letter:
“Chipotle reported their best restaurant-level results since before the foodborne illness outbreak in 2015. Along with raising employee wages, Chipotle raised prices across its menu and saw very little resistance to these price hikes. It held onto 80% of the digital orders it saw during 2020 and its digital orders accounted for nearly 50% of the quarter’s revenue. As a result of its strong momentum, management formally raised its long-term average unit volume target from $2.5 million to $3 million and hinted it could go even higher. Chipotle continues to roll out more Chipotlane drive-thru locations, which generate higher sales and returns on invested capital versus non-Chipotlane stores, while offering customers a more convenient pickup option. They also noted they are pushing forward with international expansion plans. The stock was up 19% in the third quarter and is up 34% year to date.”
Susan Law Cain / Shutterstock.com
Based on our calculations, Chipotle Mexican Grill, Inc. (NYSE: CMG) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CMG was in 35 hedge fund portfolios at the end of the first half of 2021, compared to 41 funds in the previous quarter. Chipotle Mexican Grill, Inc. (NYSE: CMG) delivered an 18.97% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
