Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Why You Should Buy These Market Leaders on Weakness

With many of the so-called momentum growth stocks declining in recent weeks amid broad market volatility, it is time for investors to consider buying into the top performers. Two of the top-performing companies lately have been Chipotle Mexican Grill (NYSE: CMG  ) and Michael Kors (NYSE: KORS  ) . With shares up 74% and 64%, respectively, in the last year alone, the recent pullbacks in these names present an opportunity for long-term growth investors.

The main driver of outperformance for both Chipotle and Michael Kors is the strong growth story behind each name. Both companies have a dedicated consumer base and the ability to charge a premium for products/services. With this, management teams at the companies are now looking to expand into new product lines and geographic markets.

Source: Chipotle. 

Chipotle's business model is deceptively simple: Offer a high-quality food product to consumers in a quick and hassle-free manner. By doing this, the company has revolutionized the fast-casual dining segment over the years. Through clever marketing techniques and selective menu additions, management at Chipotle has been able to achieve consistent same-store sales growth. The expansion of new restaurants continues to be strong as well, as 56 new stores were opened in the most recent quarter alone. 

However, the largest drivers of future growth for Chipotle are the two new restaurant brands that management is currently testing. ShopHouse is the company's fast-casual take on Southeast Asian cuisine, and Pizzeria Locale is the company's fast-casual take on the pizza segment.

The key here is that both new brands are being built from the ground up to share similarities with Chipotle's Mexican-themed restaurant. With an emphasis on healthy, high-quality ingredients, consumer choice, and fast service, there is no reason that ShopHouse and Pizzeria Locale can't be as successful as the company's original restaurant brand. The potential is massive considering there are only six ShopHouse locations and two Pizzeria Locale locations compared to 1,595 Chipotle Mexican Grill restaurants. 

Source: Michael Kors.

Michael Kors
The strength of Michael Kors is derived simply from the company's incredible brand strength among consumers. To best illustrate this strength, we turn to social media. On Facebook, Michael Kors has approximately 13.3 million fans, compared to the company's close competitor, Coach, which has only 5.1 million fans.

The brand popularity of Michael Kors means that the company is stealing market share away from older retailers like Coach. In 2011-2012, Coach's share of the U.S. handbag market fell to 17.5% from 19%, while Michael Kors' grew to 7% from 4.5%. 

To capitalize on this brand strength, management at Michael Kors is expanding internationally. Chairman and Chief Executive Officer John Idol explained in the company's most recent earnings release:

In fiscal 2014, we are on pace to open 36 new stores in Europe. Over the long-term, we believe the market can support 200 Michael Kors retail locations. We see ongoing growth momentum in the wholesale segment and look forward to further expanding our presence in the channel over the next several years. 

Additionally, management highlighted markets like Japan and the Far East. Michael Kors is opening a flagship store in China, which should increase brand awareness as well as long-term demand. While the company has 94 stores in the area currently, management stated that the market could support over double that in the future. 

Bottom line
A strong and viable growth story is essential for all aggressive growth companies. Chipotle and Michael Kors currently represent two of the strongest stories in the market, and their futures appear even brighter.

With shares of both companies off significantly due to the widespread drop in most momentum stocks, long-term investors might do well to consider buying these popular names on weakness.

6 stock picks poised for incredible growth -- are Chipotle and Michael Kors two of them?
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2900351, ~/Articles/ArticleHandler.aspx, 9/4/2015 2:58:56 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Philip Saglimbeni

Philip is an avid investor and writer. He contributes to The Motley Fool and Seeking Alpha. You can follow Philip on Twitter @philsags.

Today's Market

updated Moments ago Sponsored by:
DOW 16,048.33 -326.43 -1.99%
S&P 500 1,917.41 -33.72 -1.73%
NASD 4,664.42 -69.08 -1.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 2:42 PM
CMG $718.72 Down -6.27 -0.86%
Chipotle Mexican G… CAPS Rating: ***
KORS $43.38 Down -1.54 -3.43%
Michael Kors Holdi… CAPS Rating: ****