"We just focus on a few outstanding companies."
-- Warren Buffett
At Tier 1 Investments, a Motley Fool Real-Money Portfolio, I seek out and invest in elite businesses. These include companies with the strongest competitive advantages, largest growth opportunities, and best management. I call these businesses Tier 1 enterprises, and when I invest in them, I typically plan to hold them for many years. Unfortunately, that will not always be the case.
Panera Bread (NASDAQ:PNRA.DL) joined the Tier 1 portfolio back in February, and its stock price has risen about 10% since then. Not a terrible performance, but those returns have underperformed the S&P 500's 24% return since that time.
The main reason for my intended sale of Panera is that I want to allocate the majority of my investment capital to companies that dominate their industries -- such as Google, Amazon.com, and Starbucks -- and whose competitive advantages are growing stronger. With Panera, I've been growing increasingly concerned about competition, including an emerging threat from Starbucks, which, although not a direct competitor, will increasingly compete for consumers' dollars spent in the bakery/cafe space thanks to its acquisition of La Boulange.
Make no mistake -- I still believe Panera's investors will enjoy long-term gains from these levels. The company is likely still less than halfway toward reaching its ultimate store count potential, and Panera -- with its focus on quality ingredients -- should continue to benefit from the trend toward healthier eating. I also respect and admire co-founder and CEO Ron Shaich, and believe that he and his team will continue to position Panera for long-term success.
However, I've designed Tier 1 to be a highly focused portfolio, with my capital allocated to my very best ideas. So occasionally, as I identify new investment opportunities such as my upcoming purchase of LinkedIn, I will sell some of my current lower-conviction holdings. Panera will be my first sale in this regard.
The Foolish bottom line
At least 24 hours after this article is published -- standard operating procedure for The Motley Fool's Real-Money Stock Picks program that's designed to give Fools the opportunity to buy ahead of us should they so choose -- I will be selling Tier 1's shares of Panera Bread.
If you're interested in hearing more about one of the companies that I will be buying in Tier 1, check out this free report, which explains why my chief technology officer is putting more than $100,000 of his own money into it. To access this valuable information, all you have to do is click here now.
Joe Tenebruso manages a Real-Money Portfolio for The Motley Fool and is an analyst on the Fool's Stock Advisor and Supernova premium service teams. You can connect with him on Twitter: @Tier1Investor. Joe owns shares of LinkedIn.
The Motley Fool recommends and owns shares of Amazon.com, Google, LinkedIn, Panera Bread, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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