Why I'm Chowing Down on More Chipotle

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This article is part of ourReal-Money Stock Picksseries.

In April, I finally pulled the trigger and bought some shares of quick-serve burrito wrapper Chipotle Mexican Grill (NYS: CMG) for the real-money portfolio I'm managing for Fool.com. As it turns out, the price retreat I had long hoped for came to pass after I went for the shares. But, oh well: I see the lower price as an opportunity to add a dash more of Chipotle's special spiciness into my portfolio.

My basic buy thesis hasn't changed since April. The Denver-based restaurant chain continues to have great growth potential, with about 1,260 restaurants in the U.S. When you compare that number to, say, former parent McDonald's (NYS: MCD) , which has 33,510 mostly franchised stores, you can imagine that Chipotle's got some room for expansion.


In addition, Chipotle could really give investors a pleasant surprise in the future if it ends up expanding its style to other concepts, like the ShopHouse Southeast Asian Kitchen concept it's currently testing.

Last but not least, Chipotle's focus on "Food with Integrity" -- adding naturally raised, organic, locally grown, and additive-free ingredients whenever possible -- makes Chipotle a company that voluntarily aims for loftier goals than most rivals. That makes Chipotle far more similar to Whole Foods Market (NAS: WFM) (which also resides in my portfolio) than most quick-serve restaurant peers.

Companies with lofty ideals and innovative ideas on how to run responsible, sustainable businesses are exactly the types of companies I seek to include in my real-money portfolio.

Overall market weakness and fears about Europe have led to lower prices on lots of stocks lately. Chipotle's price got particularly slammed in late June after an analyst mentioned the specter of decelerating same-store sales growth. However, I observed that such panic at the metaphorical bistro, leading some to ditch their shares in Chipotle and other restaurants, gave savvy investors an opportunity to buy for the long haul.

Despite Chipotle's recent weakness, it still doesn't look like a traditionally bargain-priced stock, trading at 35 times earnings; that's far higher than Panera Bread's (NAS: PNRA) forward price-to-earnings ratio of 22, and heck, McDonald's and Yum! Brands (NYS: YUM) sport forward P/Es of just 15 and 17, respectively.

Still, I'm often willing to pay a premium for very strong companies that boast great brands and lofty ideals in sustainability and social responsibility. In the long run, I believe these will be the leaders that generate amazing, sustainable growth. Chipotle fits the bill.

If Chipotle just doesn't do it for you as a potential investment, find out about 3 American Companies Set to Dominate the World: Click the link for your free report.

At the time this article was published Alyce Lomax owns shares of Whole Foods Market in her personal portfolio. The Motley Fool owns shares of McDonald's, Chipotle Mexican Grill, Whole Foods Market, and Panera Bread. Motley Fool newsletter services have recommended buying shares of Panera Bread, McDonald's, Whole Foods Market, and Chipotle Mexican Grill. Motley Fool newsletter services have recommended creating a bear put spread position in Chipotle Mexican Grill. The Motley Fool has a disclosure policyWe Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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