Portfolio Manager David Yucius Jr. of Lebenthal Asset Management looks for steady, sustainable companies that run independent of what the economic environment might be providing. He does look for secular growth stories to an extent, one example being Chipotle Mexican Grill, Inc. (CMG).
“I prefer to hold such companies for longer periods. It’s nice to find the longer runways for growth,” Yucius says.
David Yucius Jr.
“[Chipotle] is a nice story with a passionate base of customers. Chipotle has done a great job because they have been able to expand the number of stores into different markets over the last couple of years, but it has enjoyed strong same-store sales growth on top of that. They have been able to win by attracting new customers, by expanding their store base and by gaining pricing.”
Yucius says CMG has had control over pricing, which is unusual in the restaurant space, and has been able to charge a premium because of its organic-product focus.
“They also have opportunities to extend their concept of organic foods to two other concepts by rolling out an Asian noodle concept and a margherita pizza concept that are in beta testing. They have opportunities to grow internationally. There are a lot of planks that this seemingly simple restaurant company has been able to exploit as they move on.”
Yucius says CMG has been a very rewarding investment, and he believes the valuation is still attractive.
“All the companies that we have ever bought are done so after passing through the GARP filter. They originated as a growth-at-a-reasonable-price candidate in our quantitative process. Chipotle is a company that has grown 20% to 30% for really the last seven, eight and nine years with very steady growth,” he says.
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