A Healthy Balance Sheet

Food for Thought

A Healthy Balance Sheet


I was raised by strict parents.  Mom was in charge, and she had a lot of rules for the four of us kids to follow.  As for food, she wanted us to develop good eating habits at an early age.  No candy, no snacks between meals and no colas.  And she wanted us to eat everything that she served, so that we wouldn't become picky eaters.

Mom wasn't the greatest cook, but she always served a wide variety of nutritious food.  When I say wide, I mean everything from liver and onions to cow's tongue!

Mom's view on food made quite an impression on me. 

Although it has been decades since I lived with my parents, I continue to abide by most of mom's rules.  I still don't eat candy or snacks, although once in a while I indulge with a Pepsi.  Oh, and I sometimes enjoy a glass of wine with my meal, which certainly was not allowed while I was growing up.

We were always allowed to eat as much as we wanted, but none of us had a weight problem, because we stayed active.  As the only boy in my family, I was the big eater.  I can remember working in a very hot steel mill during the summers.  My mom would pack three sandwiches, fruit, cookies and a quart of milk for my lunch every day. 

Thank goodness I don't eat that much now!  I have learned to cut back on my consumption as the years go by.  Recently, I haven't been getting as much exercise, so I know I need to cut back a little more.

Before heading back to college recently, my 20 year-old son spent two months with my wife and me during his summer recess.  I was surprised at how much he ate until I remembered the big lunches my Mom packed for me when I was his age. 

I was also amazed at how much my son has learned about food by working in restaurants while attending college.  At college, he saves a bundle of money by making his own meals rather than buying expensive school cafeteria meals. 

While he was with us this summer, he was frugal as well and cooked with lots of rice, vegetables and spices, and then added a little chicken or shrimp.  He also prepared various pasta dishes, which were inexpensive.  I call him the "frugal gourmet!" 

The good part is that my son stays away from expensive pre-packaged meals that often contain unhealthy preservatives, sodium, sugar or trans-fats. 

I thought that I was eating healthy before, but now I know I can improve.  My son has taught me how to eat better and less expensively.

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My featured stock today is a restaurant chain that serves healthy food and has a healthy balance sheet.  I featured Chipotle Mexican Grill (CMG) in the latest issue of my Cabot Benjamin Graham Value Letter.

Chipotle is defined as a smoked and usually dried jalapeno chili used in Mexican or Mexican-inspired cuisine.  Chipotle chilies are used to make various salsas.  The company, Chipotle Mexican Grill, develops and operates 886 restaurants in 33 states. 

Cabot Stock of the Month - Diversify for Less Than 13 Cents Per DayCMG has become highly successful by offering fast service and high-quality Mexican food in a casual atmosphere.  All dishes are prepared using fresh ingredients.  The company emphasizes the use of raw ingredients that are raised without the use of animal byproducts, antibiotics or hormones, as well as produce that is grown using sustainable farming methods.

Same store sales increased 1.9% during the six months ended June 30, despite the current slump at other restaurants.  Total sales increased 15% as a result of menu price increases and the opening of 50 new restaurants.  Earnings per share (EPS) jumped 49%, aided by the price increases and some cost cutting.

Chipotle will expand aggressively during the next several years, which will drive 20% or better sales and earnings growth during the next three to five years.  The company plans to open about 125 new restaurants in 2009 after opening 136 in 2008.  CMG opened its first restaurant in Canada in 2008 and will add many new locations there in the future. 

Chipotle has a very strong balance sheet with lots of cash and no debt.  The company pays no dividend.  CMG shares sell at a reasonable 24.2 times next 12-month EPS.  I highly recommend buying CMG at the current price.


J. Royden Ward
For Cabot Wealth Advisory

Editor's Note: You can read more about Chipotle and get continuing coverage of the stock in Cabot Benjamin Graham Value Letter. There you'll not only find buy and sell advice for CMG, you'll get dozens of other excellent value stock recommendations from J. Royden Ward each and every month. Roy applies the strategy of the father of value investing, Benjamin Graham, to find the market's best undervalued stocks. This year he's already uncovered several stocks that were sold for double-digit profits! Don't miss out on his next recommendations ... click here now to get started today!



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