When I was looking through some data files this week I noticed that last year at this time my stock selection tool, Portfolio Grader, had shares of Chipotle Mexican Grill (CMG) rated as a sell.
Growth in earnings and revenues had fallen a little short of expectations and the large institutions were dumping the shares pricing the price down from a high over $400 down to about $250 a share.
There was no buying pressure and the quantitative grade for the stock plummeted. Since then of course the shares have risen by more than 80%. Did we miss the boat on this and leave a bunch of money on the table?
Let’s take a look and see what happened in the past year.
In April the company reported earnings and caught the Street off guard with impressive revenue and profits growth. The results surpassed analyst expectation and institutional investors began to consider the stock once again. The stock moved up a little bit and trading volumes improved.
Portfolio Grader noticed the improvements and upgraded Chipotle stock from a sell to a hold rating. Analysts were still concerned about difficult consumer-spending environment and lower comps so the reaction towards the stock was lukewarm at best with the stock moving back up to around the $325 area.
Then in July Chipotle reported another sold quarter surpassing the expectations of Wall Street. After the second positive quarterly performance analysts began to jump on the bandwagon and Chipotle stock started moving higher.
The continued fundamental improvements and renewed buying pressure was identified by Portfolio Grader and with the stock right around $375 a share Chipotle stock was upgraded by Portfolio Grader to a B, or buy rating.
While we missed the initial part of the rally off the lows we waited until the stock was back in the sweet spot with all engines humming and the fundamentals moving in the right direction.
When the company reported 3rd quarter earnings and had another solid year over year performance with better than expected revenues the stock was rewarded with an A , or strong buy, rating from Portfolio Grader. Institutional investors started to pour money into Chipotle stock as they recognized the best of the best fundamental performance of the company and the stock shot higher in the third quarter.
When Chipotle reported 4th quarter and full year 2013 results it showed continued excellent performance. For the year the company had revenue growth of 20.3% and profit growth of 29.3%. During the year they opened 183 new locations around the country as consumers continued to enthusiastically embrace the company’s concept and food.
Portfolio Grader continues to give Chipotle stock the highest grade of A and the shares are a strong buy in this very selective market.
Portfolio Grader helps you find the very best stocks when they are in the sweet spot delivering strong growth and seeing institutional buying pressure move the stock price higher. While we did not get the entire move off the lows in Chipotle a soon as the fundamentals change so did our ranking and from the initial buy signal in July of 2013 until today the stock has shot up by about 60%.