McDonald’s (NYSE:MCD) spun off its 50.8% share of Chipotle Mexican Grill (NYSE:CMG) stock in October 2006. McDonald’s shareholders had the option at that time to exchange one MCD share for 0.8879 shares of Chipotle stock. 

If you had 100 shares of MCD stock in 2006, you would have approximately $43,330 today if you opted for Chipotle stock and $18,433 if you decided not to exchange your 100 shares of the Golden Arches.

And that’s after Chipotle’s 28-month drive through the desert which saw CMG stock lose 67% of its value as a result of serious food hygiene issues at some of its restaurants.

After surging 69% year-to-date through Nov. 12, Chipotle stock appears ready to deliver a second straight double-digit annual return in 2019.

Should you buy the shares?

Buy Chipotle Stock

I haven’t written about Chipotle in a very long time. Sure, I did include CMG stock in a list of ten stocks I thought would surprise the Street in 2018, and that has happened. Still, I haven’t written a column focusing solely on the restaurant chain since March 2017.

In my March 2017 article, I wondered if activist investor Bill Ackman would sell his Chipotle stock after making very little money on it. I concluded that Chipotle’s turnaround was working. If I could see that, Ackman, with seats on the board, definitely was aware of it.

In my mind, Ackman wouldn’t dare sell his shares of CMG stock. And it appears that he hasn’t sold most of them. After unloading around 900,000 shares at the end of August to take profits, Pershing Square Capital Management still likely owns more than 2 million shares, or 7.4%, of CMG stock.

Ackman’s had an excellent year in 2018, and CMG has been a big part of that. I think he will hang onto CMG stock through 2019.

That alone appears to give Chipotle stock a great chance to provide its shareholders with a second consecutive year of double-digit returns.

Also, InvestorPlace contributor Louis Navellier recently noted that Chipotle CEO Brian Niccol, who came to CMG from Taco Bell in March, has done an excellent job in the seven-plus months he’s run CMG. Specifically, Niccol’s five-point plan, which includes digitizing Chipotle’s business, appears to be working, Navellier wrote.    

“Chipotle has a plan, it’s executing that plan and that plan is working,” Navellier wrote in a column published on Nov. 9. “What’s more, a more confident consumer means that dining out is a more likely choice. And that is going to mean continued strength for CMG stock,” he added.

If the 48% increase in the company’s third-quarter digital sales is any indication, I’d have to agree.

Why You May Want to Pass on Chipotle Stock

There are only two reasons why I would pass on CMG stock.

The first is its valuation. I don’t have a problem with its current valuation of 24 times cash flow given the good things that are happening at CMG, but a value investor sure would.

Secondly, the markets could be ready to take a prolonged nap or even undergo a major correction, as investors realize that President Trump’s economic agenda will send the country into the jaws of a recession, sooner rather than later.

But CMG’s margins are strengthening, its same-store sales are coming to life, and CMG is getting its confidence back.

The Bottom Line on Chipotle Stock

The company recently cut the number of restaurants it expects to open in 2018 to around 130 from as many as 150 to ensure that it executes the openings well. In 2019, it plans to open at least 140 restaurants, a sign that Niccol is confident about the company’s outlook.

I expect to write more columns about CMG stock, and I believe that CMG will deliver another big return in the year ahead.

As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.