Why Chipotle Could Help Ackman Outperform after a Dismal 2018



Chipotle worked wonders for Bill Ackman

Bill Ackman bought a stake in Chipotle Mexican Grill (CMG) worth $1.19 billion in September 2016. The average price paid by the company to acquire CMG stock was estimated at $405. CMG was trading at $637 on March 13, 2019, implying a rise of 57% for Pershing Square since acquiring it. The stock has risen 47.5% YTD, significantly outperforming peers (XLY) Shake Shack (SHAK) and McDonald’s (MCD), which have returned 16.9% and 2.5%, respectively, in the same period. CMG stock has also outpaced gains in the broader markets, as the S&P 500 (SPY) and the Dow Jones Industrial Average Index (DIA) have returned 12.6% and 10.4%, respectively, YTD.

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The accelerated price action of Chipotle

The price action in Chipotle stock has been on an accelerated uptrend since the company launched its loyalty program, Chipotle Rewards, on March 12. Customers will earn ten points for every $1 spent either in the restaurant or online. After reaching 1,250 points, the customer receives a free entrée. The company also offers extra-point days. You can read Chipotle Stock Rises on Loyalty Program Launch for more detail.

Chipotle’s turnaround and Bill Ackman

Chipotle has been one of the major contributors to Pershing’s YTD outperformance. In its latest shareholder letter, Pershing Square stated that “early signs that the new strategy is working have already emerged.” Bill Ackman had a big role to play in bringing Chipotle’s current CEO, Brian Niccol, over from Taco Bell. Niccol, who was instrumental in turning things around for Taco Bell, has made significant progress in restructuring Chipotle and driving long-term sustainable growth.

You can also read Is 2019 Bill Ackman’s Comeback Year after a Series of Losses? to know more about Bill Ackman’s other bets and performance.


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