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I had a Chipotle burrito once on, if I recall correctly, a trip to Denver with the college debate team. I liked it so much that I put the first $2k of BCC's pr
by patio11 12y ago
I had a Chipotle burrito once on, if I recall correctly, a trip to Denver with the college debate team. I liked it so much that I put the first $2k of BCC's profits (2006 and early 2007) into Chipotle shares. Then I sat on them.
This was pure, unadulterated good luck, but the present value of those shares approaches that of BCC as a freestanding business.
Fun story: back in the day, Chipotle had two share classes: CMG.A and CMG.B. The B shares were what McDonalds had originally gotten, but they could be bought and sold on the open market -- if you knew how to ask your broker for them. They had no intrinsic reasons to be less valuable than A shares -- they had 5x the voting rights but were otherwise identical. And they traded at a 10% discount to A shares for over a year, because Chipotle was growing quickly, people were logging into their discount brokerage to buy CMG, and their brokerages were giving them CMG.A.
After quite a bit of headscratching about this, I figured out the correct series of incantations to get my discount brokerage to give me the B shares instead. Two years later, larger investors convinced the board to approve converting B shares into A shares on a 1:1 basis. Instant 10% ROI kicker if you had been holding them.
(In a company which wasn't growing like wildfire you would have been able to sell CMG.A and buy CMG.B to arbitrage this price difference away, but apparently demand for shorting CMG.A was so high that doing this in quantity was difficult.)
- thissideup 12y agoGot any stock tips? EDIT: Thanks for the reminder that nothing mildly humorous is tolerated on HN.
- jonah 12y agoHis tip was "invest in the brands you like."
- patio11 12y agoI would not actually suggest this as a strategy, since you almost certainly won't beat the market. Again, dumb luck. 75% of my investments are in index funds. If you're investing solely for returns, they should be substantially 100% of your equity allocation. (My last 25% is my concession to a deep-seated desire to play WoW with real money.)
- christiangenco 12y agoThis a hundred times. Mr. Money Mustache - the patio11 of the finance blogosphere - has a great overview on why index funds are the best long term strategy: http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/ http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-...
- Ntrails 12y agoAs an alternative, "invest in the CEOs you like". One of my fathers better investments was in Rolls Royce, which was based on a chance encounter with the then CEO on a bridge in London watching rowing.
- elmin 12y agoThe issue was that it wasent a funny enough joke for it to even be clear that it was a joke.
- hkmurakami 12y agoI would posit that what you did wasn't just "dumb luck". You actually went through the customer experience and tried the product, and enjoyed both tremendously. Through that process you actually understood more about the business than you're giving yourself credit for. If you read Peter Lynch's books on how retail investors should pick stocks, this is exactly what he recommends (ex: his wife loved l'eggs stockings, couldn't stop talking about them, and the stock performed tremendously). Now, I don't believe retail investors should be picking stocks at all, but if you are going to, then this isn't such a bad way to go about things. For instance, I think it beats picking stocks based on what you read in the financial news outlets any day of the week (which a lot of people do). Source: One Up on Wall Street
- enraged_camel 12y agoNot sure if I agree with your narrative. The first time I had a Chipotle burrito, it was stuffed so full that it exploded onto my lap as I was taking the first bite. I was thoroughly annoyed and didn't eat there for five years (until I discovered their burrito bowls, but it was too late to buy their stock by then!). So I agree with Patrick that he got lucky. :)
- hkmurakami 12y agoMaybe Patrick took enough sample data points! ;)
- delecti 12y agoOne of the key "strategies" is that you leave it in the foil for structural support. It makes a pretty huge difference in the overall experience.
- mikeash 12y agoI agree to an extent, but the Chipotle experience and product are hardly unique (nor were they at that time), and I don't think the things that caused Chipotle to do so much better than the others are things you'd see as a customer. (Although he would have still done pretty well if he had gone to a Qdoba instead and decided to put the money into Jack in the Box stock as a result.)
- seanalltogether 12y agoI'm from Denver and invested for similar reasons. I've always liked the burritos personally, but it was when a friend from Northern Ireland had one and wouldn't stop talking about it, that I realized there was nothing stopping them from expanding worldwide.
- melvinmt 12y ago> And they traded at a 10% discount to A shares for over a year, because Chipotle was growing quickly, people were logging into their discount brokerage to buy CMG, and their brokerages were giving them CMG.A. The caveat is that this discount is only beneficial to a buy-and-hold strategy, in fact this discount was probably offset by the fact that CMG.B was less liquid than CMG.A and the spread was probably a bit higher as it was traded less often. Arbitrage opportunities are often too good to be true for a reason: selling CMG.B shares was probably the same trouble as buying them (before the split) so this market inefficiency was causing the 10% difference.
- timr 12y agoWhen was the Denver trip? I was a college debater (in Denver), and Chipotle #1 was the campus burrito joint for me.