Clutching the Cold Burrito

This article is part of our Real-Money Stock Picks series.

When it comes to Chipotle Mexican Grill (NYSE: CMG  ) , you could say my timing hasn't been impeccable. I got impatient and bought stakes in Chipotle for my real-money portfolio twice in recent months (check here and here), and lo and behold, the stock price has finally receded by a long shot. In fact, Chipotle's shares got absolutely walloped over just a few days this past week. Whoops.

Last week's quarterly report caused more panic at the bistro than ever. However, even though customer traffic has slowed, Chipotle's quarter didn't lack spice by any stretch. The burrito slinger's profit surged 61%; its total revenue grew a healthy 21%. Same-store sales may have missed analysts' estimates, but heck, Chipotle's 8% increase in quarterly comps is still incredibly impressive in the current economic environment.

Chipotle's culinary and pecuniary misery has company, too. Former parent McDonald's (NYSE: MCD  ) has been a very strong restaurant performer for ages now, but the fast-food leader recently reported its own disappointing quarter, with a decreased profit.

Right now, the panic is palpable: Investors are shunning companies that rely on consumers spending on things they like to have, but possibly don't need to have, like dining out or pricier foodstuffs. Whole Foods Market (Nasdaq: WFM  ) , another stock purchased for my real-money portfolio, has experienced a plunge in stock price partially on speculation that it could follow in Chipotle's supposedly abjectly disappointing footsteps when it reports quarterly results.

More drama: Is the new Cantina Bell menu from Yum! Brands' (NYSE: YUM  ) Taco Bell going to take Chipotle out? And holy cow, what's going to happen to another premium-priced quick-serve stock, Panera Bread (Nasdaq: PNRA  ) ?

Right now, anything goes when it comes to pessimistic scenarios about stocks like Chipotle. The sky and stock prices are falling.  

That's why we need take a deep breath and count to 10. My timing on Chipotle may not seem impeccable right now, but here's the thing: Nobody really can perfectly predict or time things in the market. Macroeconomically speaking, the world's a mess, and the American consumer's beleaguered and pinching pennies. Regardless, long-term investors will accept times like these as buying opportunities, and if they've already bought shares of the best companies out there (and I consider Chipotle to be one), then they'll hold on tight and ride this out.

Time will tell, but high-quality companies will survive and thrive over the long haul.

Alyce Lomax owns shares of Whole Foods Market in her personal portfolio. The Motley Fool owns shares of Whole Foods Market, Panera Bread, McDonald's, and Chipotle Mexican Grill. Motley Fool newsletter services have recommended buying shares of McDonald's, Panera Bread, Chipotle Mexican Grill, and Whole Foods Market. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days..


Read/Post Comments (5) | Recommend This Article (16)

Comments from our Foolish Readers

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  • Report this Comment On July 25, 2012, at 1:11 AM, lowmaple wrote:

    O K you blew it big time. I'm not rubbing it in since many have thought it could go on forever. For those of us who missed the boat over the last few years and even those the bought along with you if there are funds available 'doubling down' can be done sometime soon. Buying in thirds or sixths for those that have a position will pay off in a few years maybe sooner.

  • Report this Comment On July 25, 2012, at 9:10 AM, ayalara wrote:

    No real moat.

  • Report this Comment On July 25, 2012, at 9:15 AM, beekeeper6 wrote:

    Taco Bell's Cantina Menu will not run Chipotle out of town, any more than Qdoba or Baha Fresh have been able to. Taco Bell will move onto some other novelty in 6 months, and Chipotle will continue to be a solid stock for decades to come.

  • Report this Comment On July 25, 2012, at 10:13 AM, chopchop0 wrote:

    Silly to pay >40 P/E for a gourmet fast-food stock. PNRA would have been a more reasonable stock to purchase, and it actually popped after reporting.

    The only fast food stocks I've kept in my portfolio the last couple of years is YUM and MCD. Best of breed IMO

  • Report this Comment On July 30, 2012, at 8:48 AM, assisgnmeaname wrote:

    Hey - for those of you who dismiss Taco Bell competition, you don't get it....it means that CMG has to keep their prices down (in a rising cost environment) and increase their spending on advertising and promotions for as long as Taco Bell and others are trying to cut into the pie....get it? It's about slumping margins and sss, not foot traffic per se. That is why CMG has to have a lower multiple to be compelling.

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Related Tickers

12/18/2014 4:00 PM
CMG $655.60 Up +6.45 +0.99%
Chipotle Mexican G… CAPS Rating: ***
MCD $93.67 Up +2.02 +2.20%
McDonald's CAPS Rating: ****
PNRA $168.68 Up +1.61 +0.96%
Panera Bread CAPS Rating: ****
WFM $48.96 Up +0.41 +0.83%
Whole Foods Market CAPS Rating: ****
YUM $71.74 Up +1.14 +1.61%
Yum! Brands CAPS Rating: ****

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