Chipotle (CMG) Looks Tasty

Jim Cramer went crazy about Chipotle (CMG) last night on Mad Money.  The stock has taken off since earnings were announced this week and it gapped up to a new high yesterday.  The option premiums are rich due to the high implied volatility for puts.  I have an order in to sell a naked put well OTM on any pull back.  With implied volatility lower for the calls, buying a call might be a decent move too.  We might not even see a pull back on this stock any time soon and just as easily could see it lose 10-20%. 

I missed out on the big run that Panera Bread (PNRA) had five plus years ago when it was really expanding fast.  I’ve regretted that ever since.  It was after I read one of Peter Lynch’s books where he suggested buying what you know.  I ate at Panera fairly often and it always had long lines and was expanding.  I talked to my wife about it and she didn’t want to invest in it because she didn’t really like the food there.  I waited and it rocketed.  (I haven’t taken her advice on a stock pick since and she hasn’t asked me to.)

I have not eaten at Chipotle yet, but have heard from others that it’s really good.  One concern could be the higher food costs from what they call the “unprocessed, seasonal, family-farmed, sustainable, nutritious, naturally raised, added hormone free, organic, and artisanal“.  With higher food costs CMG could have a harder time handling a customer slow down.  That customer slow down could come from a slowing economy where customers don’t have as much extra cash to spend on better foods.  I don’t think that concern should be too big yet considering their price points are still fairly low and they have very little debt to hold them back.  The big opportunity is in the growth they have shown and still have planned.

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