1 00:00:00,040 --> 00:00:02,720 Welcome back everyone. We have an exciting busy episode 2 00:00:02,720 --> 00:00:05,920 to get into. I just did three buys, three 3 00:00:05,920 --> 00:00:07,960 buys based off of this busy week. 4 00:00:08,200 --> 00:00:11,760 As we know, entering into this week, I gave you my intrinsic 5 00:00:11,760 --> 00:00:15,040 value estimates of companies that I hold and companies on my 6 00:00:15,040 --> 00:00:17,160 watch list. These were the list of companies 7 00:00:17,160 --> 00:00:20,000 that I was looking at very closely going into earnings 8 00:00:20,280 --> 00:00:22,440 companies that I've studied, I've looked at. 9 00:00:22,680 --> 00:00:25,080 I really like the economics. I really like the business 10 00:00:25,080 --> 00:00:28,560 models as far as what I consider to be good companies. 11 00:00:28,970 --> 00:00:32,090 These are good companies. So the big question is, can I 12 00:00:32,090 --> 00:00:33,810 buy these companies at the right price? 13 00:00:33,810 --> 00:00:36,970 Can I get them on a deal? As an investor that buys 14 00:00:36,970 --> 00:00:40,410 companies based on the future cash flows, I'm always trying to 15 00:00:40,410 --> 00:00:43,570 get those future cash flows at as cheap a price as possible. 16 00:00:43,570 --> 00:00:46,930 And in many cases, the earnings week we went through is a great 17 00:00:46,930 --> 00:00:49,570 opportunity to pick up more shares of companies we've been 18 00:00:49,570 --> 00:00:52,610 looking at, at cheaper prices. So let's go ahead and jump right 19 00:00:52,610 --> 00:00:54,730 in. I did 3 total buys. 20 00:00:54,890 --> 00:00:58,000 Two of them are companies already in this portfolio and 21 00:00:58,000 --> 00:01:00,760 one of them, one of them is a brand new holding. 22 00:01:00,760 --> 00:01:02,640 I'll be going over all three in detail. 23 00:01:02,760 --> 00:01:05,480 Let's go ahead and get started. Number one is in the financial 24 00:01:05,480 --> 00:01:07,680 category. It is my largest holding, my 25 00:01:07,680 --> 00:01:11,320 biggest conviction in My Portfolio which is SMP Global. 26 00:01:11,640 --> 00:01:14,920 I currently have a staggering position size in this company. 27 00:01:15,160 --> 00:01:19,760 This is a lot of money for me, which is almost $68,000 right 28 00:01:19,760 --> 00:01:22,040 now. We currently only have $7000 in 29 00:01:22,040 --> 00:01:25,680 the green because I've only owned this company this year 30 00:01:26,020 --> 00:01:28,220 just year to date. This is one that I just recently 31 00:01:28,220 --> 00:01:30,940 bought into. But I really, really like this 32 00:01:30,940 --> 00:01:33,260 company. When I look on social media and 33 00:01:33,260 --> 00:01:36,140 I look on YouTube and I see the type of stocks that people talk 34 00:01:36,140 --> 00:01:40,020 about, it's not companies like S&P Global S&P Global's left out 35 00:01:40,020 --> 00:01:42,780 of the conversation because they don't sell any flashy product 36 00:01:43,100 --> 00:01:47,420 like a nice Eva, nice car. They don't sell iPhones. 37 00:01:47,700 --> 00:01:50,220 They're not Google, where they have products that you use on a 38 00:01:50,220 --> 00:01:53,620 daily basis, and it's not a company that has a cult 39 00:01:53,620 --> 00:01:56,570 following like Palantir. S&P Global is one of these 40 00:01:56,570 --> 00:01:59,010 companies that seems like it's a little bit boring and more 41 00:01:59,010 --> 00:02:03,370 washed up, but it's not. S&P Global is a globally 42 00:02:03,370 --> 00:02:07,130 dominant tech platform with enormous data sets that's 43 00:02:07,130 --> 00:02:10,690 harnessing the power of a I. It is a diversified company 44 00:02:10,850 --> 00:02:13,930 that's highly monopolistic. They have a credit rating 45 00:02:13,930 --> 00:02:17,810 business where they rate 90% of the global debt in the world. 46 00:02:18,090 --> 00:02:21,770 That is a huge monopolistic position, an enviable position 47 00:02:21,770 --> 00:02:24,010 for this company. They have another massive 48 00:02:24,010 --> 00:02:26,330 segment of their business, which is all data. 49 00:02:26,570 --> 00:02:30,130 This company has more data than most companies could ever dream 50 00:02:30,130 --> 00:02:33,170 of, and they're layering upon that data AI. 51 00:02:33,490 --> 00:02:36,850 They have data of markets, they have data of commodities, They 52 00:02:36,850 --> 00:02:39,170 have data in so many different places that they sell to 53 00:02:39,170 --> 00:02:42,650 customers in SAS subscriptions and usage based models. 54 00:02:42,770 --> 00:02:46,410 This company has an indicee business where they control half 55 00:02:46,410 --> 00:02:49,290 the ETF's that people invest in. They are a globally dominant 56 00:02:49,290 --> 00:02:52,830 player and market and indices offering up more data and more 57 00:02:52,830 --> 00:02:56,350 tools surrounding indices. So they're in an incredibly 58 00:02:56,430 --> 00:02:59,910 enviable position, a wide Moat business with high barriers to 59 00:02:59,910 --> 00:03:02,270 entry that's incredibly capital efficient. 60 00:03:02,310 --> 00:03:05,750 One of my favorite parts about this business is even though 61 00:03:05,750 --> 00:03:09,430 they are a tech company and they are growing quickly and they do 62 00:03:09,430 --> 00:03:12,630 generate enormous amounts of free cash flow, they do it 63 00:03:12,710 --> 00:03:15,870 efficiently. In fact, S&P Global is a more 64 00:03:15,870 --> 00:03:19,270 efficiently ran company than literally all of big tech. 65 00:03:19,780 --> 00:03:25,340 Google, Amazon, Apple, Microsoft, Meta, NVIDIA, Tesla, 66 00:03:25,620 --> 00:03:28,740 none of them come close to the efficiency of SP Global. 67 00:03:29,020 --> 00:03:31,580 They generate billions and billions of dollars of cash flow 68 00:03:31,780 --> 00:03:35,740 while only spending a couple $100 million on stock based 69 00:03:35,740 --> 00:03:38,140 comp. And they spend very little on 70 00:03:38,140 --> 00:03:41,520 CapEx as well. So this company, whenever they 71 00:03:41,520 --> 00:03:44,640 make money, that money goes right back to the investors. 72 00:03:44,800 --> 00:03:47,840 It's not wasted on frivolous projects or overpaid employees. 73 00:03:47,840 --> 00:03:50,240 So let's go ahead and talk about what happened to this company. 74 00:03:50,600 --> 00:03:53,400 Well, S&P Global reported earnings after market closed 75 00:03:53,400 --> 00:03:57,040 yesterday and the stock traded down around 7%. 76 00:03:57,280 --> 00:04:00,240 If I switch to the weekly view here, we can see what happened. 77 00:04:00,600 --> 00:04:05,200 I'm down $4000 this week, which is 5.77%. 78 00:04:05,520 --> 00:04:10,000 Just yesterday it was down 7% and I initiated a buy this 79 00:04:10,000 --> 00:04:14,000 morning that bought another $2000.00 of this stock after it 80 00:04:14,000 --> 00:04:16,720 sold down. Now why did S&P Global sell off? 81 00:04:17,040 --> 00:04:20,839 Well, we can read the headlines, a lot of algorithms and bots and 82 00:04:20,839 --> 00:04:24,600 different traders in the market trade based off of basic top and 83 00:04:24,600 --> 00:04:27,160 bottom line headlines. And in this case, the headline 84 00:04:27,160 --> 00:04:30,880 was that the results were mixed. That's the impression you got 85 00:04:30,880 --> 00:04:33,160 with this earnings result. If you were to just go in and 86 00:04:33,160 --> 00:04:37,400 read any news publication, you would read the S&P Global posted 87 00:04:37,400 --> 00:04:40,460 mixed results. Mixed results aren't good. 88 00:04:40,780 --> 00:04:43,820 It means that there's some good and some bad in the results, 89 00:04:44,060 --> 00:04:46,100 therefore making it mixed, right. 90 00:04:46,100 --> 00:04:48,420 So that's the impression that everybody's getting when they 91 00:04:48,420 --> 00:04:51,420 read these type of headlines. Let's go ahead and take a look 92 00:04:51,420 --> 00:04:53,460 at how mixed these results really are. 93 00:04:53,460 --> 00:05:00,980 S&P Global non GAAP earnings per share of $3.12 misses by 1 cent. 94 00:05:01,380 --> 00:05:06,040 That is the mixed results. One penny and earnings per 95 00:05:06,040 --> 00:05:07,840 share. And that's not one penny. 96 00:05:07,840 --> 00:05:10,960 When it was supposed to earn 2 pennies, that's one penny. 97 00:05:11,080 --> 00:05:15,800 When it was supposed to earn $3.13, meaning that they were 98 00:05:15,800 --> 00:05:21,600 off from the analyst estimates by less than 1/3 of 1%, that was 99 00:05:21,600 --> 00:05:24,640 the mixed results. This is the type of technical 100 00:05:24,640 --> 00:05:27,960 miss that a company can have. That's very pass fail. 101 00:05:28,160 --> 00:05:31,320 But if we look at this through any realistic lens, this is 102 00:05:31,320 --> 00:05:33,880 basically in line with their expectations. 103 00:05:34,330 --> 00:05:37,570 They literally hit their earnings per share within a 1 104 00:05:37,730 --> 00:05:41,250 penny margin of error. That is in line now the revenue 105 00:05:41,250 --> 00:05:43,650 beat by 40 million, so I guess that is good news. 106 00:05:43,930 --> 00:05:46,690 But overall investors are looking at that one penny miss. 107 00:05:46,730 --> 00:05:49,970 So we have those mixed results, dragging down the company by 7%, 108 00:05:50,290 --> 00:05:53,050 shaving off $8 billion worth of market cap. 109 00:05:53,370 --> 00:05:55,650 And this is what makes it even more silly to me. 110 00:05:55,810 --> 00:05:57,970 This is what means that investors are having a big 111 00:05:57,970 --> 00:06:00,530 overreaction. Let's go ahead and bring up S&P 112 00:06:00,530 --> 00:06:02,290 Global's actual earnings report here. 113 00:06:02,710 --> 00:06:05,270 And there's one part of this that I think is really 114 00:06:05,270 --> 00:06:07,550 important. If we Scroll down and we get to 115 00:06:07,550 --> 00:06:10,430 the company's actual guidance where they give how much they're 116 00:06:10,430 --> 00:06:13,110 going to earn and all their different financial metrics for 117 00:06:13,110 --> 00:06:17,310 the year, S&P Global is one of these companies that's very kind 118 00:06:17,310 --> 00:06:20,110 to investors. They're an incredibly investor 119 00:06:20,150 --> 00:06:24,310 focused company and what they do is they give more detailed 120 00:06:24,310 --> 00:06:26,510 guidance than most companies in the market. 121 00:06:26,910 --> 00:06:30,390 Most companies don't try to give you much details on cash flows 122 00:06:30,390 --> 00:06:33,530 or operating cash. They might give you some revenue 123 00:06:33,530 --> 00:06:36,770 growth, maybe some CapEx guidance, but most of them do 124 00:06:36,770 --> 00:06:39,050 not give guidance to this level of detail. 125 00:06:39,130 --> 00:06:42,370 And S&P Global reiterated, meaning they reaffirm the same 126 00:06:42,370 --> 00:06:45,210 guidance they gave previously for their revenue growth, 127 00:06:45,250 --> 00:06:48,890 operating profit margins, tax rate, diluted earnings per share 128 00:06:49,050 --> 00:06:52,490 and free cash flow. Every single operating metric of 129 00:06:52,490 --> 00:06:55,530 this business, They reiterated the same guidance. 130 00:06:55,730 --> 00:06:58,490 They said they're going to earn the exact same amount that they 131 00:06:58,490 --> 00:07:01,940 said 1/4 ago. So in terms of their opinions of 132 00:07:01,940 --> 00:07:04,660 how profitable the company is going to be by the end of this 133 00:07:04,660 --> 00:07:08,420 year, it is identical. Nothing has changed quarter over 134 00:07:08,420 --> 00:07:10,060 quarter. The only thing that has changed 135 00:07:10,060 --> 00:07:12,220 over the past couple of days is the price. 136 00:07:12,380 --> 00:07:14,460 Now in terms of valuation for the company. 137 00:07:14,460 --> 00:07:18,260 S&P Global makes this very easy. They basically spell out how 138 00:07:18,260 --> 00:07:20,740 much money they're going to make this year, and the reason they 139 00:07:20,740 --> 00:07:23,820 can do this is because their business operates with such 140 00:07:23,820 --> 00:07:26,500 predictability and such efficiency. 141 00:07:26,780 --> 00:07:30,420 Most companies cannot tell you exactly what their free cash 142 00:07:30,420 --> 00:07:33,620 flow will be for the entire year, but S&P Global can, and 143 00:07:33,620 --> 00:07:38,300 they say it will be between 4.2 billion and 4.3 billion. 144 00:07:38,300 --> 00:07:41,020 So I'm going to assume they make the higher end of that $4.3 145 00:07:41,020 --> 00:07:42,860 billion. I think they'll be able to hit 146 00:07:42,860 --> 00:07:48,340 that metric with a $128 billion market cap and $4.3 billion of 147 00:07:48,340 --> 00:07:51,500 free cash flow. We run a very simple calculation 148 00:07:51,820 --> 00:07:54,860 and we see that the current yield based on 2020 three's cash 149 00:07:54,860 --> 00:08:00,540 flow is 3.3 percent, 3.3% and they don't have much stock based 150 00:08:00,540 --> 00:08:04,740 compensation at all. So that is a clean 3.3%. 151 00:08:05,180 --> 00:08:08,340 So this company is actually much cheaper than it looks on all the 152 00:08:08,340 --> 00:08:10,260 calculators that are backwards looking. 153 00:08:10,340 --> 00:08:12,700 So I don't believe that this company is all that expensive. 154 00:08:12,700 --> 00:08:16,380 I think it's trading at a very reasonable if not low valuation. 155 00:08:16,420 --> 00:08:19,140 And another fun thing we can look at with S&P Global is what 156 00:08:19,140 --> 00:08:22,860 this 4.3 billion will look like when it's added in at the end of 157 00:08:22,860 --> 00:08:25,190 the year. This is about what it will look 158 00:08:25,190 --> 00:08:28,390 like right here. We'll have cash flows climbing 159 00:08:28,470 --> 00:08:33,030 around that high, an all new high in free cash flow in 2023. 160 00:08:33,030 --> 00:08:35,309 So by number one of the week, SP Global. 161 00:08:35,309 --> 00:08:38,549 Now moving on to #2 and who would have guessed it's Texas 162 00:08:38,549 --> 00:08:40,470 Roadhouse. This is a company that I've 163 00:08:40,470 --> 00:08:42,750 talked about a lot, so I'm not going to review the entire 164 00:08:42,750 --> 00:08:45,230 investment thesis on it. If you're someone that has 165 00:08:45,230 --> 00:08:47,550 joined the channel just recently, which we've had 166 00:08:47,550 --> 00:08:49,350 thousands and thousands of new subscribers. 167 00:08:49,350 --> 00:08:50,910 So I appreciate you following along. 168 00:08:50,950 --> 00:08:54,150 Just search my name in YouTube with Texas Roadhouse and you 169 00:08:54,150 --> 00:08:57,590 will get plenty of content. I've done extensive videos 170 00:08:57,590 --> 00:08:59,990 covering this company. Texas Roadhouse is a great 171 00:08:59,990 --> 00:09:03,110 company, a great compounder, even though it operates in the 172 00:09:03,110 --> 00:09:05,910 restaurant business, which is operationally difficult, 173 00:09:06,230 --> 00:09:09,070 difficult to succeed in, and faces many competitors. 174 00:09:09,350 --> 00:09:13,230 Texas Roadhouse has a business model that is a fold above other 175 00:09:13,230 --> 00:09:16,630 competitors and you can see that in their longterm financials. 176 00:09:16,870 --> 00:09:20,510 Continual secular revenue growth, continual earnings per 177 00:09:20,510 --> 00:09:23,710 share in that income growth, continual free cash flow growth. 178 00:09:24,100 --> 00:09:27,500 And this company's hitting a scale point right now, an 179 00:09:27,500 --> 00:09:30,380 inflection point in its cash flows where it's really 180 00:09:30,380 --> 00:09:32,980 generating more cash than they really know what to do with. 181 00:09:33,260 --> 00:09:36,220 So they're returning a ton of money back to the investor. 182 00:09:36,260 --> 00:09:39,140 Now, the interesting thing about the market is sometimes it just 183 00:09:39,140 --> 00:09:41,420 doesn't make sense. That's what the market does. 184 00:09:41,420 --> 00:09:45,540 It's based off of emotions and trading and geopolitics and 185 00:09:45,540 --> 00:09:49,140 economics and how people feel consumer sentiment as well. 186 00:09:49,420 --> 00:09:52,770 So a lot of times that trading with individual names simply 187 00:09:52,770 --> 00:09:54,650 doesn't make sense for a period of time. 188 00:09:55,010 --> 00:09:59,410 In this case, Texas Roadhouse traded down around 2% yesterday 189 00:09:59,410 --> 00:10:02,370 after reporting earnings. If a company trades down after 190 00:10:02,370 --> 00:10:04,490 earnings, you can believe one of two things. 191 00:10:04,880 --> 00:10:07,680 Either the company was overvalued or they posted 192 00:10:07,720 --> 00:10:10,640 underwhelming earnings. And in this situation, neither 193 00:10:10,640 --> 00:10:13,400 of those scenarios happen. Texas Roadhouse is not 194 00:10:13,400 --> 00:10:16,640 overvalued and the company did not report poor earnings. 195 00:10:16,720 --> 00:10:18,960 They didn't just have good earnings, they had great 196 00:10:18,960 --> 00:10:21,040 earnings. They beat on the top and bottom 197 00:10:21,040 --> 00:10:24,560 line of the annals estimates. They grew their total revenue by 198 00:10:24,560 --> 00:10:28,360 14.3%. That is very fast revenue 199 00:10:28,360 --> 00:10:31,000 growth, and I've repeated this for about two years. 200 00:10:31,540 --> 00:10:34,700 Texas Roadhouse is growing faster than most of big tech. 201 00:10:34,780 --> 00:10:37,460 The company's growing faster than most tech companies as a 202 00:10:37,500 --> 00:10:39,300 restaurant. And while they're growing their 203 00:10:39,300 --> 00:10:42,780 top line very quickly, they're also, more importantly, growing 204 00:10:42,820 --> 00:10:47,220 very profitably. Their net income grew by 13.6%, 205 00:10:47,460 --> 00:10:49,980 and then they must have done buybacks because their earnings 206 00:10:49,980 --> 00:10:53,660 per share grew by 14.7%. So we have a company growing 207 00:10:53,660 --> 00:10:58,720 nearly 15% earnings per share trading at a valuation that's 208 00:10:58,720 --> 00:11:02,200 much lower than a lot of other companies growing much slower. 209 00:11:02,480 --> 00:11:05,760 That just doesn't make sense. Comparable restaurant sales up 210 00:11:05,760 --> 00:11:09,360 9% year over year, that is incredibly good. 211 00:11:09,400 --> 00:11:12,720 Same store sales comp, Their sales now at each restaurant are 212 00:11:12,720 --> 00:11:18,240 averaging 146,727 per week. That means they have revenues of 213 00:11:18,240 --> 00:11:22,120 around 7 to $8,000,000 per restaurant every year. 214 00:11:22,280 --> 00:11:25,160 They open up 6 new restaurants during the quarter and the 215 00:11:25,160 --> 00:11:29,200 company repurchased 200 and 13,000 shares for $23 million. 216 00:11:29,280 --> 00:11:32,600 So while they can afford to do CapEx and reinvestment back into 217 00:11:32,600 --> 00:11:35,360 their business, opening up new restaurants at a pretty 218 00:11:35,360 --> 00:11:38,120 aggressive pace, they're also returning cash back to the 219 00:11:38,120 --> 00:11:39,880 shareholders. So what we have with Texas 220 00:11:39,880 --> 00:11:42,280 Roadhouse is a company that continues to have tight 221 00:11:42,280 --> 00:11:46,360 operations, fast growth, revenue growth, far above the market 222 00:11:46,360 --> 00:11:49,680 average, around double the market average, growing 223 00:11:49,680 --> 00:11:53,800 economically profitable, 15% earnings per share growth year 224 00:11:53,800 --> 00:11:57,670 over year, growing while opening up new investments, 6 new 225 00:11:57,670 --> 00:12:00,590 restaurants opened, more buybacks, more dividends. 226 00:12:00,590 --> 00:12:02,590 They're returning cash back to the shareholder. 227 00:12:02,870 --> 00:12:06,510 And they're doing all of this while being at a low valuation, 228 00:12:06,750 --> 00:12:11,190 a 3.5% free cash flow yield and A20 4PE ratio. 229 00:12:11,590 --> 00:12:14,710 And then on top of that, they have next to no liquidity risk 230 00:12:14,710 --> 00:12:17,110 because the company has no longterm debt. 231 00:12:17,590 --> 00:12:19,790 That's the company we're looking at with Texas Roadhouse. 232 00:12:20,070 --> 00:12:22,870 Why did it sell off 2% after these earnings? 233 00:12:23,270 --> 00:12:26,020 I have no clue. Maybe investors are worried 234 00:12:26,020 --> 00:12:28,820 about a recession. Maybe it's a slowdown in the 235 00:12:28,820 --> 00:12:30,940 economy. That could be it. 236 00:12:30,940 --> 00:12:33,780 But Texas Roadhouse does fine in recessions. 237 00:12:34,140 --> 00:12:36,420 Try to find the recession on the chart. 238 00:12:36,740 --> 00:12:38,780 Can you find it? Can you even see it? 239 00:12:39,140 --> 00:12:42,460 They do fine in recessions. Maybe it's because investors 240 00:12:42,460 --> 00:12:44,380 wanted to take their gains and move on. 241 00:12:44,620 --> 00:12:47,060 Who knows the reason Investors do different things. 242 00:12:47,410 --> 00:12:50,890 All I know at this company is that every metric I look at is 243 00:12:50,890 --> 00:12:54,290 headed in the right direction. So I bought another $2000.00 of 244 00:12:54,290 --> 00:12:56,530 Texas Roadhouse. So those are the two companies 245 00:12:56,530 --> 00:12:59,010 that I bought that were within My Portfolio. 246 00:12:59,450 --> 00:13:02,050 But I actually ended up introducing a new position to 247 00:13:02,050 --> 00:13:05,770 the portfolio, a brand new company and one that was on my 248 00:13:05,770 --> 00:13:08,490 watch list. If you recall earlier this week 249 00:13:08,490 --> 00:13:11,050 I highlighted a number of companies that I was looking for 250 00:13:11,450 --> 00:13:15,490 if they had a potential sell off or if I really was convinced the 251 00:13:15,490 --> 00:13:18,300 company had a very good longterm prospect. 252 00:13:18,620 --> 00:13:21,220 And although I'm extremely bullish on everyone of these 253 00:13:21,220 --> 00:13:24,020 companies, I really would feel comfortable owning all of them. 254 00:13:24,380 --> 00:13:27,660 I did end up adding one of them to the portfolio this week. 255 00:13:27,660 --> 00:13:32,620 Is it fair, Isaac Marriott, Chipotle, Moody's, Visa, MSC 256 00:13:32,620 --> 00:13:35,660 Global, some of you know that are part of the Patreon and 257 00:13:35,660 --> 00:13:37,780 Discord. Let's go ahead and look at the 258 00:13:37,780 --> 00:13:40,420 new pick. Here we have Chipotle, the fast 259 00:13:40,420 --> 00:13:44,240 casual Mexican Grill. I know this is a bit surprising. 260 00:13:44,280 --> 00:13:46,320 A lot of you are probably confused of why I added this 261 00:13:46,320 --> 00:13:48,760 company and I want to explain that now. 262 00:13:49,160 --> 00:13:53,160 Now before you race to judgment, a lot of people like to jump in. 263 00:13:53,480 --> 00:13:55,640 They like to do this with any new company. 264 00:13:55,920 --> 00:13:58,280 They come in and they look at the price of the company. 265 00:13:58,280 --> 00:14:00,040 It's trading at a very high dollar amount. 266 00:14:00,440 --> 00:14:03,360 They look at the P/E ratio and go, Joseph, this company is at a 267 00:14:03,360 --> 00:14:06,040 high P/E. This company is overvalued. 268 00:14:06,040 --> 00:14:09,080 Look at that valuation. How could you buy a burrito 269 00:14:09,080 --> 00:14:13,200 place at a 35 Ford P/E? How does that make any sense? 270 00:14:13,280 --> 00:14:16,280 Calm down just a minute and let me explain the reason I added 271 00:14:16,280 --> 00:14:19,480 this company to the portfolio. It has a lot more to do than it 272 00:14:19,480 --> 00:14:22,320 being a burrito company or having tasty food. 273 00:14:22,560 --> 00:14:26,080 It has a lot more to do than the immediate PE ratio at trades at. 274 00:14:26,080 --> 00:14:28,800 What I plan on doing over the next couple of minutes is giving 275 00:14:28,800 --> 00:14:32,080 an overview of the real reasons that I bought into Chipotle and 276 00:14:32,080 --> 00:14:35,780 it fits within a bigger grander scheme than just this company. 277 00:14:35,780 --> 00:14:39,180 Specifically see, as I was looking at My Portfolio over the 278 00:14:39,180 --> 00:14:42,180 past year, I was looking at companies and industries that I 279 00:14:42,180 --> 00:14:46,020 believe will benefit the most from artificial intelligence and 280 00:14:46,020 --> 00:14:49,020 robotics. And when I look and do analysis 281 00:14:49,020 --> 00:14:51,380 on this, most people are driven to tech companies. 282 00:14:51,660 --> 00:14:54,100 They believe that tech companies will be the biggest beneficiary 283 00:14:54,100 --> 00:14:56,970 from AI and robotics, and that may be true. 284 00:14:56,970 --> 00:14:59,890 I think these companies will benefit to a big extent, but I 285 00:14:59,890 --> 00:15:02,610 think there's other industries that are going to benefit 286 00:15:02,650 --> 00:15:06,330 heavily from robotics, optimization and AI. 287 00:15:06,690 --> 00:15:09,930 And in particular, I've always thought for a long period of 288 00:15:09,930 --> 00:15:13,050 time that restaurants will be one of the main beneficiaries of 289 00:15:13,050 --> 00:15:15,290 this. In fact, I've done episodes 290 00:15:15,290 --> 00:15:18,450 highlighting how I believe companies like McDonald's, 291 00:15:18,730 --> 00:15:22,420 companies like Chipotle, companies like Wendy's are going 292 00:15:22,420 --> 00:15:27,420 to have massive benefits from robotics, automation and a I. 293 00:15:27,580 --> 00:15:31,660 So when I look at this industry, I see huge potential here over 294 00:15:31,660 --> 00:15:34,980 the next decade for greater amount of automation and higher 295 00:15:34,980 --> 00:15:38,100 margins. Now I already have one 296 00:15:38,180 --> 00:15:41,860 restaurant company which is Texas Roadhouse, but I don't 297 00:15:41,860 --> 00:15:45,340 think that Texas Roadhouse is comparable to Chipotle because 298 00:15:45,340 --> 00:15:48,460 although Texas Roadhouse sells food, and that's a similarity, 299 00:15:48,770 --> 00:15:50,530 their business models are different. 300 00:15:50,650 --> 00:15:54,770 Texas Roadhouse is a sit down, dine in restaurant where you 301 00:15:54,770 --> 00:15:58,530 mostly eat at the location. They have very small amounts of 302 00:15:58,530 --> 00:16:00,850 takeout and they have no drive through. 303 00:16:00,930 --> 00:16:04,050 Chipotle is a fast casual restaurant, meaning that most 304 00:16:04,050 --> 00:16:06,610 people don't go into the restaurant and sit down and get 305 00:16:06,610 --> 00:16:09,330 food. That's a way around 40 to 50% of 306 00:16:09,330 --> 00:16:12,730 the people eat, but around half of them get it to go either 307 00:16:12,730 --> 00:16:15,950 through delivery like DoorDash or they get it to go through the 308 00:16:15,950 --> 00:16:17,950 Chipotle Lane. They pick it up and go. 309 00:16:17,950 --> 00:16:20,470 So even though both of these companies work with food, they 310 00:16:20,470 --> 00:16:23,350 are vastly different and Chipotle is even different than 311 00:16:23,350 --> 00:16:25,310 a lot of other fast casual restaurants. 312 00:16:25,310 --> 00:16:28,390 And what I'd like you to do when we look at Chipotle is rather 313 00:16:28,390 --> 00:16:31,750 than view this company as a burrito or Mexican food place, 314 00:16:32,150 --> 00:16:35,710 view it as a business model. That is what we are doing 315 00:16:35,710 --> 00:16:38,390 analysis on. We're not buying steaks, we're 316 00:16:38,390 --> 00:16:41,230 not buying burritos. We're buying business models. 317 00:16:41,230 --> 00:16:43,830 So let's go ahead and talk about the business model of Chipotle. 318 00:16:43,870 --> 00:16:46,350 The core business model of Chipotle relies on creating an 319 00:16:46,350 --> 00:16:49,950 enhanced fast food experience, combining elements of fine 320 00:16:49,950 --> 00:16:52,830 dining with convenient and quick service restaurants. 321 00:16:53,070 --> 00:16:55,910 Creating value for customers by offering quality foods. 322 00:16:56,110 --> 00:16:59,790 Foods that are perceived by many by most as being healthier 323 00:16:59,790 --> 00:17:03,150 alternative to many other fast food competitors like McDonald's 324 00:17:03,150 --> 00:17:05,740 or Burger King. The dining environment and 325 00:17:05,740 --> 00:17:08,980 efficient service creates a fast casual experience. 326 00:17:09,020 --> 00:17:13,260 This fast casual experience resonates particularly well with 327 00:17:13,260 --> 00:17:16,180 middle and upper class individuals, people that make 328 00:17:16,180 --> 00:17:18,700 more money and have more predictable household income. 329 00:17:18,700 --> 00:17:21,579 This demographic of customer makes Chipotle stand out from 330 00:17:21,579 --> 00:17:24,260 the rest of the competition. Chipotle tries to combine two 331 00:17:24,260 --> 00:17:26,300 different aspects. They want their food to be 332 00:17:26,300 --> 00:17:29,420 incredibly fast. They want it to be faster than 333 00:17:29,420 --> 00:17:32,870 McDonald's, faster than Burger King, but also highquality. 334 00:17:33,030 --> 00:17:36,230 That second part is very difficult to accomplish. 335 00:17:36,510 --> 00:17:39,750 Creating fast food is one thing. Many companies can do that. 336 00:17:39,990 --> 00:17:43,270 But to create food very fast that's also highquality and 337 00:17:43,270 --> 00:17:46,070 somewhat healthy makes it much more complex. 338 00:17:46,190 --> 00:17:48,750 And historically, trying to combine these two things, both 339 00:17:48,750 --> 00:17:51,310 fast and highquality, is difficult to do. 340 00:17:51,510 --> 00:17:54,430 And most restaurants focus on one or the other. 341 00:17:54,630 --> 00:17:57,480 They don't want to beat both. McDonald's is fast. 342 00:17:57,480 --> 00:18:00,160 It's not high quality. Chipotle's trying to do both of 343 00:18:00,160 --> 00:18:02,600 these at the same time. The way that you measure how 344 00:18:02,600 --> 00:18:05,840 fast a restaurant is is through a measurement called throughput. 345 00:18:06,080 --> 00:18:09,040 That is, how many people can go through the restaurant and get 346 00:18:09,040 --> 00:18:11,840 their food within a 10 minute time period. 347 00:18:11,880 --> 00:18:15,600 Chipotle's throughput can turn over around 300 customers per 348 00:18:15,600 --> 00:18:18,000 hour on average. The way that Chipotle is able to 349 00:18:18,000 --> 00:18:20,120 accomplish this incredible throughput through their 350 00:18:20,120 --> 00:18:23,320 restaurants is by having their specific ordering system. 351 00:18:23,640 --> 00:18:26,160 You've seen this now at probably a lot of restaurants because 352 00:18:26,160 --> 00:18:29,480 there's a lot of them adapting the same type of operating model 353 00:18:29,480 --> 00:18:32,240 to some extent. But they have an assembly line 354 00:18:32,240 --> 00:18:35,240 where all the food is laid out in a table in front of the 355 00:18:35,240 --> 00:18:38,320 customer, and then they move from left to right, constructing 356 00:18:38,320 --> 00:18:40,160 the perfect burrito or burrito bowl. 357 00:18:40,280 --> 00:18:43,520 The workers on the assembly line each take ownership of a small 358 00:18:43,520 --> 00:18:46,320 segment of the work. The division of Labor makes it 359 00:18:46,320 --> 00:18:48,640 so that there's a lot more efficiency when going through 360 00:18:48,640 --> 00:18:50,420 the line. This sets them up for 361 00:18:50,420 --> 00:18:54,180 consistency across the entire process as well as making it 362 00:18:54,180 --> 00:18:57,140 much quicker overall. And Chipotle is doing advanced 363 00:18:57,140 --> 00:19:00,900 logistics things with AI to recognize demand and different 364 00:19:00,900 --> 00:19:03,340 part of the restaurants that make it so the company can 365 00:19:03,340 --> 00:19:06,900 increase this overtime. That is the fast part of 366 00:19:06,900 --> 00:19:09,340 Chipotle. That is the fast food part, 367 00:19:09,540 --> 00:19:13,220 making it so that you get in and out of the store quickly. 368 00:19:13,380 --> 00:19:16,660 The last thing that they want is for people to look at Chipotle 369 00:19:16,660 --> 00:19:19,480 and think it takes forever to get my food there. 370 00:19:19,720 --> 00:19:22,040 That is one of the biggest things they're trying to 371 00:19:22,040 --> 00:19:25,120 accomplish is increasing throughput and they've made big 372 00:19:25,120 --> 00:19:27,000 advancements on that in the past year. 373 00:19:27,080 --> 00:19:28,640 But what about the highquality part? 374 00:19:28,680 --> 00:19:31,200 That's where Chipotle is highly differentiated than most of 375 00:19:31,200 --> 00:19:33,920 their competitors. They only resource highquality 376 00:19:33,920 --> 00:19:36,560 ingredients and prepare their food fresh in stores. 377 00:19:36,760 --> 00:19:39,760 They have no freezers because the company believes you can 378 00:19:39,760 --> 00:19:43,000 taste the difference between a store that has freezers and one 379 00:19:43,000 --> 00:19:44,920 that doesn't. This decision reflects the 380 00:19:44,920 --> 00:19:47,600 pricing premium. Chipotle has higher quality 381 00:19:47,600 --> 00:19:49,960 foods, so they can charge a higher quality price for it. 382 00:19:50,360 --> 00:19:54,320 They also only sell full price items and rarely run promotions, 383 00:19:54,520 --> 00:19:58,360 which is very uncommon strategy given competitors like Taco Bell 384 00:19:58,360 --> 00:20:00,560 that run promotions every day of the week. 385 00:20:00,560 --> 00:20:02,680 They're always trying to give away certain parts of their 386 00:20:02,680 --> 00:20:04,400 food. The decisions that Chipotle 387 00:20:04,400 --> 00:20:08,240 makes to not have the fast food style of marketing is 388 00:20:08,240 --> 00:20:10,750 intentional. They want to be differentiated. 389 00:20:10,790 --> 00:20:13,510 They want to be looked at as having better, higher quality, 390 00:20:13,750 --> 00:20:16,590 more prepared food than most of their competitors. 391 00:20:16,750 --> 00:20:19,870 You may notice that Chipotle doesn't include a lot of items 392 00:20:19,870 --> 00:20:22,750 that would be off brand. They don't sell you sugar 393 00:20:22,750 --> 00:20:25,310 cookies at the beginning of the line because they know that 394 00:20:25,310 --> 00:20:27,950 would be perceived as unhealthy and they want everything in 395 00:20:27,950 --> 00:20:30,750 their company to be real foods. So there's a little bit about 396 00:20:30,750 --> 00:20:32,550 Chipotle's overall business model. 397 00:20:32,550 --> 00:20:35,750 In summary, it's fast food because you can go in and get it 398 00:20:35,750 --> 00:20:37,950 very quickly. You can get it efficiently 399 00:20:37,950 --> 00:20:40,670 through a digital app, you can order ahead or you can have it 400 00:20:40,670 --> 00:20:43,790 delivered fast. Is a huge part of this company 401 00:20:43,990 --> 00:20:46,470 and the throughput is a major focus of them. 402 00:20:46,790 --> 00:20:50,270 Now, while they're focusing on fast, they're also focusing on 403 00:20:50,270 --> 00:20:52,670 high quality. Chipotle wants to make the type 404 00:20:52,670 --> 00:20:56,310 of food that you can eat every day and not feel bad about 405 00:20:56,310 --> 00:20:59,550 yourself, not feel like you're destroying your body by eating 406 00:20:59,550 --> 00:21:01,510 the food. And that's because of the high 407 00:21:01,510 --> 00:21:04,670 quality ingredients and the overall recipes that are made 408 00:21:04,670 --> 00:21:06,670 with health in mind. So you have that mixture of 409 00:21:06,670 --> 00:21:09,790 higher quality fast made food. Now the next thing I'd like to 410 00:21:09,790 --> 00:21:13,590 focus on when I look overall at these type of companies and you 411 00:21:13,590 --> 00:21:16,230 can include a lot of different fast food type of companies in 412 00:21:16,230 --> 00:21:18,590 this category, I think all of them will benefit. 413 00:21:18,910 --> 00:21:22,820 But I believe Chipotle has ample room to benefit here, and that 414 00:21:22,820 --> 00:21:26,780 is automation and efficiencies. That's the next thing I'd like 415 00:21:26,780 --> 00:21:29,020 to focus on. I believe Chipotle is going to 416 00:21:29,020 --> 00:21:34,100 be a huge beneficiary of automation, robotics and AI over 417 00:21:34,100 --> 00:21:36,460 the next 10 years. A lot of these things aren't 418 00:21:36,460 --> 00:21:38,260 hypothetical. There are things that are 419 00:21:38,260 --> 00:21:41,500 happening right now. And in the immediate future, we 420 00:21:41,500 --> 00:21:44,540 have things like this. This is a robot called Chippy. 421 00:21:44,860 --> 00:21:47,260 Not that, man. They're cutting the limes, but 422 00:21:47,260 --> 00:21:51,460 we have this right here, this machine called Chippy, which 423 00:21:51,460 --> 00:21:55,900 literally makes homemade fresh chips, and it seasons them 424 00:21:56,260 --> 00:21:59,620 robotically. This is new technology. 425 00:21:59,740 --> 00:22:01,700 This is efficiencies happening real time. 426 00:22:01,860 --> 00:22:04,780 Currently, right now, it's humans doing all of this work at 427 00:22:04,780 --> 00:22:06,860 every restaurant. Humans make the chips in the 428 00:22:06,860 --> 00:22:09,220 restaurant every single day. So what are they doing? 429 00:22:09,220 --> 00:22:12,580 They're investing in the Chippy, a robot that could potentially 430 00:22:12,580 --> 00:22:15,500 replace the humans, and they're going to start testing it in new 431 00:22:15,500 --> 00:22:18,430 locations. This is one form of automation 432 00:22:18,430 --> 00:22:20,590 that will reduce the amount of Labor necessary. 433 00:22:20,710 --> 00:22:23,710 Reducing the amount of Labor means more optimization. 434 00:22:23,870 --> 00:22:26,910 More optimization means higher margins for investors. 435 00:22:27,030 --> 00:22:30,430 Now, one of the most difficult part of food prep at Chipotle is 436 00:22:30,510 --> 00:22:33,350 avocados. These guys sell a ton of 437 00:22:33,430 --> 00:22:37,110 avocados because it's in almost everyone of their recipes. 438 00:22:37,110 --> 00:22:41,400 Everyone of their meals on their menu has avocados, so they're 439 00:22:41,400 --> 00:22:43,480 one of the biggest avocado buyers in the world. 440 00:22:43,600 --> 00:22:46,200 And these avocados have to be hand prepared by chefs working 441 00:22:46,200 --> 00:22:49,760 at Chipotle every single day. The chefs at Chipotle have said 442 00:22:49,760 --> 00:22:52,480 that this is one of the most difficult part of preparation. 443 00:22:52,800 --> 00:22:55,040 You have to do it by hand. It takes a long time. 444 00:22:55,120 --> 00:22:57,680 They have to go in way ahead of the opening of the restaurant to 445 00:22:57,680 --> 00:22:59,680 get this prepared. And the employees have 446 00:22:59,680 --> 00:23:01,400 complained about doing this task. 447 00:23:01,880 --> 00:23:06,200 So in comes the Autocado. This is a machine where you can 448 00:23:06,200 --> 00:23:08,800 see that they just dump in avocados. 449 00:23:09,240 --> 00:23:13,030 It goes through this roller and then somehow there's magic that 450 00:23:13,030 --> 00:23:14,830 happens. A lot of cutting, a lot of 451 00:23:14,830 --> 00:23:18,790 tooling, and then there's a shelf of prepared avocados. 452 00:23:19,030 --> 00:23:21,390 The only thing left is to mash them. 453 00:23:21,790 --> 00:23:24,670 And I believe the reason that they aren't mashing them with 454 00:23:24,670 --> 00:23:28,110 the robot is simply so they can say that they're hand mashed. 455 00:23:28,230 --> 00:23:30,470 But this is real automation being rolled out in their 456 00:23:30,470 --> 00:23:31,390 restaurants. Right now. 457 00:23:31,390 --> 00:23:34,830 This is only in a couple restaurants out of their 2300, 458 00:23:35,170 --> 00:23:38,010 but this will be rolled out into more restaurants over the next 459 00:23:38,010 --> 00:23:40,890 two years. So we have chip makers, avocado 460 00:23:40,890 --> 00:23:42,770 preppers and it doesn't stop there. 461 00:23:42,850 --> 00:23:45,570 The grilling is called the most difficult part to train for. 462 00:23:45,730 --> 00:23:49,410 Chipotle likes to have their chicken be juicy and be seared 463 00:23:49,410 --> 00:23:52,050 on both sides excellently every single dish. 464 00:23:52,330 --> 00:23:55,010 They don't want people to have bad experiences with the chicken 465 00:23:55,210 --> 00:23:57,130 not being tasty or having a good sear. 466 00:23:57,610 --> 00:24:00,090 But more importantly than that, for the efficiencies of the 467 00:24:00,090 --> 00:24:03,680 company, the productivity of each restaurant is how long it 468 00:24:03,680 --> 00:24:07,640 takes to grill chicken. On average right now it takes 469 00:24:07,640 --> 00:24:11,920 around 16 minutes for Chipotle to grill their chicken, 16 470 00:24:11,920 --> 00:24:14,840 minutes because they use a normal flattop grill where they 471 00:24:14,840 --> 00:24:18,640 have to repeatedly turn the chicken over and over until it's 472 00:24:18,640 --> 00:24:20,320 seared and grilled on both sides. 473 00:24:20,640 --> 00:24:24,640 Flattop grills only heat one side at a time, so you have to 474 00:24:24,880 --> 00:24:28,080 flip it over to heat both sides and get that sear on both sides. 475 00:24:28,200 --> 00:24:30,280 Chipotle is investing in different ways to increase the 476 00:24:30,280 --> 00:24:34,350 productivity of their grill and this is where the double sided 477 00:24:34,350 --> 00:24:36,710 grill comes in. It's also called the Clamshell 478 00:24:36,710 --> 00:24:38,710 grill. Some restaurants are already 479 00:24:38,710 --> 00:24:41,390 testing out and using this new double sided grill. 480 00:24:41,710 --> 00:24:44,830 Chili's is one of them and other burger places have invested in 481 00:24:44,830 --> 00:24:47,270 it as well. The grill we developed clamps 482 00:24:47,270 --> 00:24:50,310 and does the press for employees so we don't have to have a super 483 00:24:50,310 --> 00:24:53,790 strong or have long arms, they just bring down the press. 484 00:24:54,030 --> 00:24:56,590 That press also creates a more consistent burger. 485 00:24:56,910 --> 00:25:00,150 If you go to a Chili's that has this double sided grill, you'll 486 00:25:00,150 --> 00:25:03,950 notice that the burgers are perfectly cooked with smash 487 00:25:03,950 --> 00:25:07,190 burger style on both sides every single time. 488 00:25:07,470 --> 00:25:10,030 And that's not because the chefs magically got better at the 489 00:25:10,030 --> 00:25:12,150 restaurant. That's because they invested in 490 00:25:12,150 --> 00:25:15,830 a highly expensive but incredible double sided grill 491 00:25:16,150 --> 00:25:18,710 and these grills are rolling out in Chipotle. 492 00:25:19,190 --> 00:25:22,350 Chipotle actually has more to benefit from burger joints 493 00:25:22,550 --> 00:25:25,230 because chicken takes longer to cook than most burgers. 494 00:25:25,230 --> 00:25:28,110 Chipotle says that they cut down the cook time of their chicken 495 00:25:28,410 --> 00:25:32,770 from 16 minutes to under 4 minutes, huge savings in the 496 00:25:32,770 --> 00:25:35,650 amount of cook time. This has a huge benefit for both 497 00:25:35,650 --> 00:25:38,250 the employees and the customers at each restaurant. 498 00:25:38,530 --> 00:25:41,130 They can cook chicken more evenly because it does a perfect 499 00:25:41,130 --> 00:25:44,010 syrup on both sides. They cook it in less than half 500 00:25:44,010 --> 00:25:47,290 the time, meaning that they can cook it in smaller batches so 501 00:25:47,290 --> 00:25:50,290 the chickens more fresh at every restaurant that has this grill. 502 00:25:50,610 --> 00:25:54,010 And if they ever run out of chicken, it's only four minutes, 503 00:25:54,130 --> 00:25:57,290 not 16, that they have to wait for customers to get their 504 00:25:57,290 --> 00:25:59,560 chicken O. The benefits of this double 505 00:25:59,560 --> 00:26:02,720 sided grill when it rolls out to new locations is further 506 00:26:02,720 --> 00:26:05,880 roductivity gains now. Right now, this grill is only in 507 00:26:05,880 --> 00:26:08,380 10 locations. They've been testing it, but 508 00:26:08,380 --> 00:26:12,020 Chipotle plans to roll out the new grill to their locations 509 00:26:12,020 --> 00:26:14,700 over the next two years. They're going to be making that 510 00:26:14,700 --> 00:26:18,020 CapEx investment, putting in the large bulk orders and making 511 00:26:18,020 --> 00:26:20,140 this the standard across all of their restaurants. 512 00:26:20,180 --> 00:26:23,340 So you can see the theme here. We have robots making chips, we 513 00:26:23,340 --> 00:26:27,500 have robots prepping avocados, we have double sided clamshell 514 00:26:27,500 --> 00:26:30,460 grills that give a perfect sear and cut down on cooking time. 515 00:26:30,580 --> 00:26:34,260 And then we have the Holy Grail, What this all culminates to 516 00:26:34,260 --> 00:26:37,860 eventually This seems a little farfetched, but I just want to 517 00:26:37,860 --> 00:26:41,460 follow along here for a minute. Robotic make lines, The make 518 00:26:41,460 --> 00:26:44,340 line is the prep line at the beginning of Chipotle where they 519 00:26:44,340 --> 00:26:47,540 put the food in the bowl for you or they form the burrito for 520 00:26:47,540 --> 00:26:49,660 you. And Chipotle's investing in 521 00:26:49,700 --> 00:26:52,940 fully automated make lines. Chipotle announced that they're 522 00:26:52,940 --> 00:26:56,240 investing in a company called Hyphen, a food service platform 523 00:26:56,240 --> 00:26:59,400 designed to help restaurant owners, operators, and budding 524 00:26:59,400 --> 00:27:02,120 chefs move their business forward by automating kitchen 525 00:27:02,120 --> 00:27:04,760 operations. The company's first product, the 526 00:27:04,760 --> 00:27:08,000 Make Line, is an automated system that utilizes advanced 527 00:27:08,000 --> 00:27:11,560 robotics and a customized operating system to give busy 528 00:27:11,560 --> 00:27:15,560 kitchens a reliable and precise way to make and fulfill orders. 529 00:27:15,920 --> 00:27:19,360 The Make Line assembles all digital orders under the counter 530 00:27:19,360 --> 00:27:22,560 via automated production while allowing staff to assemble 531 00:27:22,560 --> 00:27:24,920 inhouse orders from top of the counter. 532 00:27:24,920 --> 00:27:29,160 So this is a fully automated system for making food, for 533 00:27:29,160 --> 00:27:31,200 prepping all of it and assembling it. 534 00:27:31,240 --> 00:27:34,800 This is the overall Holy Grail of where all of this automation 535 00:27:34,800 --> 00:27:37,360 leads to. Ultimately, I believe long 536 00:27:37,360 --> 00:27:40,050 enough down the road that these type of companies that have 537 00:27:40,050 --> 00:27:43,130 entrenched market positions and the CapEx to be able to invest 538 00:27:43,130 --> 00:27:46,010 in these type of technologies will benefit dramatically from 539 00:27:46,010 --> 00:27:50,050 improved efficiencies between digital applications, robotics 540 00:27:50,050 --> 00:27:52,250 and AI. I believe these companies will 541 00:27:52,250 --> 00:27:56,210 become heavily automated over the next decade, leading to much 542 00:27:56,210 --> 00:27:59,570 greater efficiency and much higher margins for the investor. 543 00:27:59,570 --> 00:28:02,450 I've said before that I basically view fast food 544 00:28:02,450 --> 00:28:05,450 restaurants as glorified vending machines. 545 00:28:05,740 --> 00:28:08,500 They're basically like a traditional vending machine, but 546 00:28:08,500 --> 00:28:12,100 instead of spitting out a candy or a soda pop, they spit out a 547 00:28:12,100 --> 00:28:15,740 hot consistent meal, One that people look forward to, one 548 00:28:15,740 --> 00:28:19,660 that's so efficiently ran, so inexpensive compared to going to 549 00:28:19,660 --> 00:28:23,100 the grocery store that they are the preferred option for all of 550 00:28:23,100 --> 00:28:25,220 millennials and the younger generation. 551 00:28:25,260 --> 00:28:27,700 These type of advanced vending machines, whether it's 552 00:28:27,700 --> 00:28:32,260 McDonald's, Wendy's, Chickfila or Chipotle are going to become 553 00:28:32,500 --> 00:28:36,810 more and more advanced overtime. Chipotle is investing heavily in 554 00:28:36,810 --> 00:28:39,410 these advancements and you can see it across all of their 555 00:28:39,410 --> 00:28:41,170 efforts. So I believe automation will 556 00:28:41,170 --> 00:28:43,530 play a huge role in the future of this company. 557 00:28:43,610 --> 00:28:46,250 Now we can't talk about automation and AI without 558 00:28:46,250 --> 00:28:49,490 mentioning the digital properties this company has the 559 00:28:49,490 --> 00:28:52,770 Chipotle app. Apps can seem like not a big 560 00:28:52,770 --> 00:28:54,770 deal right? Who cares if a restaurant has an 561 00:28:54,770 --> 00:28:57,530 app or not? But some cases they make all the 562 00:28:57,530 --> 00:29:01,090 difference. Consider Starbucks's app that is 563 00:29:01,170 --> 00:29:04,330 a massive part of the investment thesis of Starbucks. 564 00:29:04,710 --> 00:29:07,630 Everybody knows that Starbucks app turned the company from a 565 00:29:07,630 --> 00:29:11,190 simple drink place, a coffee place, to a place where they're 566 00:29:11,190 --> 00:29:13,830 a natural bank. They have billions of dollars of 567 00:29:13,830 --> 00:29:17,230 customers money without any cost of capital, leading to 568 00:29:17,230 --> 00:29:18,910 incredible growth in the company. 569 00:29:19,190 --> 00:29:22,790 The apps make a big difference, and it's the same in the case of 570 00:29:22,790 --> 00:29:25,350 Chipotle. Around half continually use the 571 00:29:25,350 --> 00:29:29,230 app for digital orders before pickup, so it's heavily used. 572 00:29:29,230 --> 00:29:32,420 Their customer base uses this app, and that's hugely 573 00:29:32,420 --> 00:29:35,340 advantageous for Chipotle. Like most of these companies, 574 00:29:35,340 --> 00:29:36,860 they have a good rewards program. 575 00:29:37,100 --> 00:29:40,500 Every time that you go and eat food at Chipotle, you can scan 576 00:29:40,500 --> 00:29:43,060 your app or you can order ahead with the app. 577 00:29:43,420 --> 00:29:45,780 And a lot of people are doing that ordering ahead. 578 00:29:45,980 --> 00:29:48,540 When they do that, they earn reward points. 579 00:29:48,740 --> 00:29:51,620 When they earn reward points, they can get different food or 580 00:29:51,620 --> 00:29:54,500 different items for free. So it incentivizes customers of 581 00:29:54,500 --> 00:29:57,140 Chipotle to continually go back and eat there again. 582 00:29:57,620 --> 00:30:00,740 And to further incentivize people, they make the rewards 583 00:30:00,820 --> 00:30:03,140 temporary. They don't last forever. 584 00:30:03,140 --> 00:30:04,540 They only last a couple of months. 585 00:30:04,900 --> 00:30:08,020 Chipotle will give you reminders to use your rewards for the free 586 00:30:08,020 --> 00:30:10,860 food before they expire. That makes it so you have 587 00:30:10,860 --> 00:30:13,740 pressure. You have some urgency to go back 588 00:30:13,740 --> 00:30:16,220 to Chipotle and use up those free points. 589 00:30:16,540 --> 00:30:18,580 If you don't, they expire worthless. 590 00:30:18,900 --> 00:30:21,940 So this creates A virtuous cycle for Chipotle. 591 00:30:22,260 --> 00:30:24,260 People come in to use their rewards. 592 00:30:24,460 --> 00:30:27,670 While they use their rewards, they earn more rewards, which 593 00:30:27,670 --> 00:30:30,710 incentivizes them to come back again over and over again. 594 00:30:30,710 --> 00:30:33,110 The cycle continues. Now that's great. 595 00:30:33,110 --> 00:30:36,590 The reward system is really fun. They also gamify it, and they 596 00:30:36,590 --> 00:30:39,110 give you little achievements and badges when you hit certain 597 00:30:39,110 --> 00:30:41,510 amount of points. But that's not even the biggest 598 00:30:41,510 --> 00:30:43,150 thing I want to point out with the app. 599 00:30:43,350 --> 00:30:46,230 Although the reward system is great, I believe where Chipotle 600 00:30:46,230 --> 00:30:49,670 really stands above the competition is the level of 601 00:30:49,670 --> 00:30:53,150 customization within the app. In most companies, you can 602 00:30:53,150 --> 00:30:56,830 customize a few things, but not anywhere close to the level of 603 00:30:56,830 --> 00:30:58,590 Chipotle. If you get a burrito bowl, for 604 00:30:58,590 --> 00:31:00,470 example, you can pick your protein. 605 00:31:00,550 --> 00:31:03,310 There's seven different options. You can mix and match that with 606 00:31:03,310 --> 00:31:05,710 two different types of rice. You can add in two different 607 00:31:05,710 --> 00:31:08,990 types of beans, and then there's ten different types of toppings 608 00:31:08,990 --> 00:31:10,910 that you can mix and match on this bowl. 609 00:31:10,950 --> 00:31:14,110 That is a level of combination and customization that most 610 00:31:14,110 --> 00:31:17,030 restaurants do not give you. You can't go in and mix and 611 00:31:17,030 --> 00:31:20,510 match that many parts of most fast food meals, but Chipotle 612 00:31:20,510 --> 00:31:24,340 has the technology and the ability to execute on these 613 00:31:24,340 --> 00:31:26,220 orders that are highly customizable. 614 00:31:26,580 --> 00:31:29,540 The only company that I believe is somewhat synonymous to 615 00:31:29,540 --> 00:31:32,100 Chipotle in this regard is Starbucks. 616 00:31:32,260 --> 00:31:35,620 Starbucks is highly customizable with their drinks, and both 617 00:31:35,620 --> 00:31:38,300 companies have had to go through great efforts to make that 618 00:31:38,300 --> 00:31:40,500 achievable. So it's not just an app that 619 00:31:40,500 --> 00:31:43,140 gives a little bit of rewards, it's a highly customizable 620 00:31:43,140 --> 00:31:46,300 system that allows you to customize your meal, order it 621 00:31:46,300 --> 00:31:49,140 ahead of time, and pick it up at a certain time, leading to an 622 00:31:49,180 --> 00:31:52,670 overall better system. This is an ecosystem that takes 623 00:31:52,670 --> 00:31:56,150 a long time to build, and most restaurants, especially ones at 624 00:31:56,150 --> 00:31:59,070 this scale, don't have close to this good of a system. 625 00:31:59,110 --> 00:32:02,070 So between the robotics and the huge digital properties, 626 00:32:02,070 --> 00:32:04,470 Chipotle sees a lot of optimization in both their 627 00:32:04,470 --> 00:32:06,870 logistics and in their restaurant operations. 628 00:32:06,910 --> 00:32:09,790 And I just want to mention how difficult this is to accomplish 629 00:32:09,790 --> 00:32:12,310 this type of feat at the scale that they are. 630 00:32:12,590 --> 00:32:16,510 With nearly 3500 restaurants being able to have this type of 631 00:32:16,510 --> 00:32:20,470 digital property, logistics, customization and efficiency is 632 00:32:20,470 --> 00:32:23,670 incredibly difficult. A lot of people say it's easy to 633 00:32:23,670 --> 00:32:26,230 create a burrito. They have a lot of competition. 634 00:32:26,230 --> 00:32:29,150 Anyone can start a burrito place, that's true. 635 00:32:29,150 --> 00:32:32,710 Anyone can start one single location burrito place. 636 00:32:33,070 --> 00:32:36,750 But rolling it out to 3500 locations, building a digital 637 00:32:36,910 --> 00:32:40,110 ecosystem, having it be highly efficient with the latest 638 00:32:40,110 --> 00:32:43,710 technology in every location is much easier said than done. 639 00:32:43,790 --> 00:32:46,910 And doing that while maintaining brand value over the same time 640 00:32:46,910 --> 00:32:49,110 is even more difficult. So we've gone over the high 641 00:32:49,110 --> 00:32:50,750 level business model of Chipotle. 642 00:32:50,750 --> 00:32:53,630 The company operates fast and high quality food. 643 00:32:53,870 --> 00:32:56,350 We've gone over a little bit of the optimizations and 644 00:32:56,350 --> 00:32:58,390 efficiencies the company will have over time. 645 00:32:58,710 --> 00:33:01,750 The next thing I want to talk about is the economics of the 646 00:33:01,750 --> 00:33:04,430 company, the economics and evaluation. 647 00:33:04,790 --> 00:33:07,150 This is one of my favorite parts of looking at a company and 648 00:33:07,230 --> 00:33:09,870 we're going to be using Qualtrim this tool right in front of us 649 00:33:09,870 --> 00:33:11,230 to be able to look at the economics. 650 00:33:11,560 --> 00:33:13,800 If you want to try this out, it's part of the Patreon, you 651 00:33:13,800 --> 00:33:15,120 can try it out with a free trial. 652 00:33:15,120 --> 00:33:16,960 Now let's go ahead and take a look at some of the things 653 00:33:16,960 --> 00:33:19,640 happening with this company. We already have the most recent 654 00:33:19,640 --> 00:33:24,680 quarter here, Chipotle had $2.51 billion in revenue last quarter 655 00:33:25,240 --> 00:33:28,080 and as you can see, there's nothing special. 656 00:33:28,440 --> 00:33:32,920 This is right in line with their historical growth, right what 657 00:33:32,920 --> 00:33:36,710 investors should be expecting. You can see right here when the 658 00:33:36,710 --> 00:33:39,550 revenue actually declined substantially, that was the 659 00:33:39,550 --> 00:33:42,070 foodborne illness outbreak of the company. 660 00:33:42,070 --> 00:33:44,230 Now I'm not going to get into that subject now, but they've 661 00:33:44,230 --> 00:33:46,710 taken a lot of steps to make sure that that's unlikely to 662 00:33:46,710 --> 00:33:48,910 happen again. But over the past 10 years, we 663 00:33:48,910 --> 00:33:51,230 have pretty consistent growth in their top line. 664 00:33:51,470 --> 00:33:55,270 The growth is around 12% annualized for 10 years. 665 00:33:55,390 --> 00:33:58,190 In the past five years, the growth has actually accelerated. 666 00:33:58,190 --> 00:34:01,070 So we see consistent and accelerating growth in their top 667 00:34:01,070 --> 00:34:02,990 line. Their top line grows in three 668 00:34:02,990 --> 00:34:06,260 different ways. The first way is traffic. 669 00:34:06,420 --> 00:34:09,780 I'll put tea here. Every time this company opens up 670 00:34:09,780 --> 00:34:13,420 a new location, it has a certain amount of sales the first year 671 00:34:13,699 --> 00:34:16,420 and then typically it has more the next year and then it has 672 00:34:16,420 --> 00:34:19,780 more the next year after that. And those sales are driven by 673 00:34:19,780 --> 00:34:23,300 more and more people, actual more traffic going to those 674 00:34:23,300 --> 00:34:25,860 locations. People that fall in love with 675 00:34:25,860 --> 00:34:27,980 Chipotle start going there more frequently. 676 00:34:28,260 --> 00:34:30,780 They might only go a couple times a year and then they start 677 00:34:30,780 --> 00:34:33,880 going every month and then they might start going a couple times 678 00:34:33,880 --> 00:34:36,080 a month. That is an increase in traffic. 679 00:34:36,159 --> 00:34:39,120 A main driver for this company. Now the next way they grow is 680 00:34:39,120 --> 00:34:42,040 through price. Chipotle has great brand value 681 00:34:42,040 --> 00:34:45,440 and pricing power because people fall in love with their products 682 00:34:45,440 --> 00:34:47,920 and eat it routinely. They have a little bit of price 683 00:34:47,920 --> 00:34:50,960 flexibility. Chipotle raises prices a little 684 00:34:50,960 --> 00:34:52,679 bit. Most people are willing to pay 685 00:34:52,679 --> 00:34:54,800 it. Now, pricing power with 686 00:34:54,800 --> 00:34:58,160 restaurants is constrained. They can't raise prices 687 00:34:58,160 --> 00:35:00,720 indefinitely. And over the past couple of 688 00:35:00,720 --> 00:35:03,920 years, Chipotle has exercised their pricing power a lot. 689 00:35:04,280 --> 00:35:07,480 So management has said they're taking a break from pricing 690 00:35:07,480 --> 00:35:09,640 power. They don't want to raise prices 691 00:35:09,640 --> 00:35:12,680 at all this year, but on average, they're going to be 692 00:35:12,680 --> 00:35:15,920 raising prices slightly above the rate of inflation. 693 00:35:15,960 --> 00:35:18,800 That's typically how it works with this type of restaurant. 694 00:35:19,000 --> 00:35:21,920 So we have an increase in traffic and we have continual 695 00:35:21,920 --> 00:35:24,540 increases in pricing. The combination of those two 696 00:35:24,540 --> 00:35:27,620 grow revenue maybe 7 to 8% per year. 697 00:35:28,060 --> 00:35:32,340 Then we have new locations, I'll put L there for locations. 698 00:35:32,460 --> 00:35:35,060 Chipotle doesn't just have a set amount of stores that they 699 00:35:35,060 --> 00:35:38,060 increase prices and traffic on. They're constantly opening up 700 00:35:38,060 --> 00:35:41,340 new locations. This company is still relatively 701 00:35:41,380 --> 00:35:43,780 immature. It's still a young company. 702 00:35:43,780 --> 00:35:47,100 It's like a little teenager in terms of mature restaurant 703 00:35:47,100 --> 00:35:49,060 companies. As of their latest quarter, 704 00:35:49,060 --> 00:35:53,840 Chipotle has 3300 restaurants. That is a small amount when you 705 00:35:53,840 --> 00:35:56,040 compare it to something like Starbucks. 706 00:35:56,240 --> 00:35:59,080 Starbucks has 33,000 restaurants. 707 00:35:59,120 --> 00:36:02,560 So Starbucks is an order of magnitude bigger in scale than 708 00:36:02,560 --> 00:36:05,480 Chipotle, which is good news for Chipotle investors. 709 00:36:05,720 --> 00:36:08,480 All that means is they have an ample runway for growth. 710 00:36:08,520 --> 00:36:11,640 Chipotle management has said that they're guiding for 7000 711 00:36:11,640 --> 00:36:15,960 stores within the US and Canada. So right now they're at 3300 and 712 00:36:15,960 --> 00:36:19,280 they plan to double the amount of store count in just the US 713 00:36:19,280 --> 00:36:21,930 and Canada, and that's not mentioning at all. 714 00:36:22,010 --> 00:36:25,050 International growth. This long runway of growth is 715 00:36:25,050 --> 00:36:28,770 incredibly important to the future valuation of Chipotle. 716 00:36:29,130 --> 00:36:32,810 The company can literally grow their store count double simply 717 00:36:32,810 --> 00:36:35,610 within the US Chipotle has mentioned that they're now 718 00:36:35,610 --> 00:36:38,850 starting to open up locations in smaller cities because they see 719 00:36:38,850 --> 00:36:41,410 a lot of success there. Right now, the highest 720 00:36:41,410 --> 00:36:45,250 concentration of their locations is in places like California and 721 00:36:45,250 --> 00:36:48,370 New York, highly densely populated big cities. 722 00:36:48,780 --> 00:36:50,380 But they're having success everywhere. 723 00:36:50,500 --> 00:36:53,220 And part of the reason why is people love Mexican food. 724 00:36:53,260 --> 00:36:56,780 This is a known fact. It's not some big prediction 725 00:36:56,780 --> 00:36:59,020 that people will like this type of food. 726 00:36:59,380 --> 00:37:02,860 Most places this is well tested the sentiments already known. 727 00:37:03,020 --> 00:37:05,820 Mexican food is widely accepted as a staple. 728 00:37:05,900 --> 00:37:09,100 Chipotle also has ambitious expansion plans outside of the 729 00:37:09,140 --> 00:37:12,690 US They're not only having great success in Canada right now, but 730 00:37:12,690 --> 00:37:15,010 they're also opening throughout Europe, trying to make the 731 00:37:15,010 --> 00:37:17,730 models work as good as possible in different regions. 732 00:37:17,810 --> 00:37:20,770 They've also introduced, for the first time ever, a franchise 733 00:37:20,770 --> 00:37:23,290 partner in the Middle East. They're going to be opening up 734 00:37:23,290 --> 00:37:26,690 locations in Dubai and Kuwait starting in 2024. 735 00:37:26,730 --> 00:37:29,690 The reason that they chose franchise partners for Dubai and 736 00:37:29,690 --> 00:37:31,970 Kuwait is because they want someone that knows the 737 00:37:31,970 --> 00:37:35,650 demographic there and knows how to sell their product and they 738 00:37:35,650 --> 00:37:38,970 believe by partnering with this proven partner in the Middle 739 00:37:38,970 --> 00:37:41,240 East that they can have success there as well. 740 00:37:41,360 --> 00:37:45,240 So we can expect to see a lot of location growth both at home in 741 00:37:45,240 --> 00:37:48,640 the US and internationally in Europe, in the Middle East and 742 00:37:48,640 --> 00:37:51,560 all across the globe. The same footprint that 743 00:37:51,560 --> 00:37:55,160 Starbucks followed, We can see pricing power with the company. 744 00:37:55,160 --> 00:37:57,920 They've already demonstrated that they can raise prices 745 00:37:58,160 --> 00:38:02,540 without losing customers. Their traffic is increasing even 746 00:38:02,540 --> 00:38:04,820 after raising prices aggressively over the past 747 00:38:04,820 --> 00:38:06,540 couple of years. And the three of these put 748 00:38:06,540 --> 00:38:08,940 together lead to this continued top line growth. 749 00:38:09,020 --> 00:38:11,380 Now outside of the top line growth, it's good to have good 750 00:38:11,380 --> 00:38:13,220 economics. We want companies, but we want 751 00:38:13,220 --> 00:38:16,780 them to be growing profitably and Chipotle is growing 752 00:38:16,780 --> 00:38:19,220 profitably. Last quarter they had a record 753 00:38:19,220 --> 00:38:23,780 high 543 million in EBITDA. They had an explosive record 754 00:38:23,780 --> 00:38:27,040 high in free cash flow. Look at this previous quarter, 755 00:38:27,360 --> 00:38:29,600 it's so much higher than they've ever had before. 756 00:38:29,600 --> 00:38:32,960 We're up to 445 million in free cash flow. 757 00:38:33,240 --> 00:38:36,000 And a great thing about this company is they don't have to 758 00:38:36,000 --> 00:38:39,160 deal with that pesky stock based compensation to anywhere the 759 00:38:39,160 --> 00:38:43,680 same degree as a tech company because as they grow, the size 760 00:38:43,680 --> 00:38:45,800 of their headquarters stays the same. 761 00:38:45,800 --> 00:38:49,080 Notice how over the past decade it literally hasn't gone up at 762 00:38:49,080 --> 00:38:51,080 all. It's ebbed and flowed a little 763 00:38:51,080 --> 00:38:53,000 bit, but it's still under 50 million. 764 00:38:53,040 --> 00:38:55,720 They can grow their free cash flow and keep their headquarter 765 00:38:55,720 --> 00:38:58,800 expense virtually identical. And on a free cash flow per 766 00:38:58,800 --> 00:39:01,040 share basis, the numbers get a little bit crazy. 767 00:39:01,160 --> 00:39:04,200 Over the past decade, Chipotle has grown their free cash flow 768 00:39:04,200 --> 00:39:08,560 per share above 17% compound annual growth rate, and they're 769 00:39:08,560 --> 00:39:11,240 doing this with even accelerated growth more recently. 770 00:39:11,440 --> 00:39:15,120 Now one thing I love about this company is even though they're 771 00:39:15,120 --> 00:39:18,360 generating a lot of free cash flow, they do it efficiently and 772 00:39:18,360 --> 00:39:21,040 they have great top line growth. They have one of the 773 00:39:21,040 --> 00:39:24,400 characteristics that I really, really love and companies and 774 00:39:24,400 --> 00:39:27,680 that is the good oldfashioned business model of growing your 775 00:39:27,680 --> 00:39:32,000 company through its own cash flows, paying for new locations, 776 00:39:32,000 --> 00:39:35,960 paying for your CapEx with your own free cash flow, not paying 777 00:39:35,960 --> 00:39:38,080 for it by taking out huge amounts of debt. 778 00:39:38,510 --> 00:39:41,990 Chipotle has exactly 0 longterm debt. 779 00:39:42,070 --> 00:39:44,750 Where companies get in a lot of trouble is by taking on that 780 00:39:44,750 --> 00:39:47,470 longterm debt. Interest rates change, the debt 781 00:39:47,470 --> 00:39:49,870 becomes more expensive, they have a more difficult time 782 00:39:49,870 --> 00:39:52,030 getting credit and that leads to a lot of trouble. 783 00:39:52,110 --> 00:39:54,990 Chipotle's like Texas Roadhouse. Neither of them have longterm 784 00:39:54,990 --> 00:39:57,230 debt. Management doesn't like longterm 785 00:39:57,230 --> 00:39:58,590 debt. They don't want to deal with it. 786 00:39:58,630 --> 00:40:01,670 They don't want to take on the additional risk and I don't want 787 00:40:01,750 --> 00:40:06,370 to as well as an investor. So this is something that's very 788 00:40:06,370 --> 00:40:10,370 rare in the restaurant industry. Almost every restaurant has 789 00:40:10,370 --> 00:40:14,250 longterm debt except for Texas Roadhouse and Chipotle. 790 00:40:14,330 --> 00:40:18,050 Now one downside of owning Chipotle right now is I like to 791 00:40:18,050 --> 00:40:21,010 focus on companies that have some type of return of capital 792 00:40:21,010 --> 00:40:23,370 through dividends. I love having that cash flow 793 00:40:23,370 --> 00:40:27,410 returned directly to my pockets so I can redeploy it where I see 794 00:40:27,410 --> 00:40:29,170 fit. That's one of my favorite parts 795 00:40:29,170 --> 00:40:32,250 about Vici, about Texas Roadhouse, about all the 796 00:40:32,250 --> 00:40:35,210 companies that I own in the passive income portfolio and 797 00:40:35,210 --> 00:40:38,970 Chipotle right now because of its, it's a little bit of a 798 00:40:38,970 --> 00:40:41,050 teenager in the restaurant industry. 799 00:40:41,250 --> 00:40:45,290 It's not a full grown adult and it's not at the situation right 800 00:40:45,290 --> 00:40:48,570 now where it can pay a dividend. So it's not a dividend payer 801 00:40:48,570 --> 00:40:50,890 currently. Right now they're still in the 802 00:40:50,930 --> 00:40:54,570 earlier stages of growth and they're only returning capital 803 00:40:54,610 --> 00:40:58,890 via share buyback. So you're getting around a 1.23% 804 00:40:59,090 --> 00:41:02,210 return of capital through buyback, but they're just not at 805 00:41:02,210 --> 00:41:05,450 a stage to pay a dividend. But this isn't all bad in my 806 00:41:05,450 --> 00:41:09,050 opinion. I am buying Chipotle today as a 807 00:41:09,050 --> 00:41:12,770 future dividend payer. I believe firmly this company 808 00:41:12,770 --> 00:41:16,770 will be a substantial dividend payer in the future similar to 809 00:41:16,890 --> 00:41:20,130 every other company like this one towards the end of its 810 00:41:20,130 --> 00:41:23,170 growth trajectory, look at virtually any company in the 811 00:41:23,170 --> 00:41:25,050 restaurant industry. We have McDonald's. 812 00:41:25,400 --> 00:41:26,920 McDonald's is a big dividend payer. 813 00:41:26,920 --> 00:41:29,960 Starbucks pays a big dividend, Texas Roadhouse pays a nice 814 00:41:29,960 --> 00:41:33,160 dividend, Wendy's pays a fat dividend, Cracker Barrel pays a 815 00:41:33,160 --> 00:41:36,320 really big dividend, Wingstop pays a dividend and Domino's 816 00:41:36,320 --> 00:41:38,280 pays a dividend. And I could continue on. 817 00:41:38,400 --> 00:41:40,160 All of these companies have something in common. 818 00:41:40,360 --> 00:41:42,880 They're restaurant companies, whether they be fast food or 819 00:41:42,880 --> 00:41:46,160 full service restaurant, and they're a little bit more 820 00:41:46,200 --> 00:41:48,280 mature. And I believe fully that 821 00:41:48,280 --> 00:41:50,600 Chipotle will get to the same point. 822 00:41:50,680 --> 00:41:53,280 I think it's inevitable. It's just a matter of time. 823 00:41:53,620 --> 00:41:55,660 Right now, Chipotle is in a situation where they're trying 824 00:41:55,660 --> 00:41:59,060 to scale as quickly as possible. They're putting money into CapEx 825 00:41:59,060 --> 00:42:02,140 for new investments in restaurants, new technology, new 826 00:42:02,140 --> 00:42:06,020 automation, new app experiences, and they're trying to reach that 827 00:42:06,020 --> 00:42:09,740 7000 restaurant in the US saturation. 828 00:42:10,180 --> 00:42:14,620 I believe when they reach 7000 restaurants in the US, they will 829 00:42:14,620 --> 00:42:17,700 be paying a dividend at that point and the people that bought 830 00:42:17,700 --> 00:42:21,260 the shares earlier way before they paid the dividend will get 831 00:42:21,260 --> 00:42:24,500 a much higher yield on cost than the people that will be buying 832 00:42:24,500 --> 00:42:27,060 it. Then as a dividend payer, I'm 833 00:42:27,060 --> 00:42:29,980 sacrificing what I believe is some current yield right now to 834 00:42:29,980 --> 00:42:31,620 have greater yield in the future. 835 00:42:31,780 --> 00:42:34,060 But with the predictability of the business model and the 836 00:42:34,060 --> 00:42:36,900 industry that they reside in, I fully believe this company's 837 00:42:36,900 --> 00:42:39,340 going to pay a dividend within the next 10 years. 838 00:42:39,420 --> 00:42:42,180 So that's my thoughts on Chipotle and why I added it to 839 00:42:42,180 --> 00:42:44,450 the portfolio. And I also think it's good to 840 00:42:44,450 --> 00:42:47,770 mention to not blindly follow me into any trade. 841 00:42:48,010 --> 00:42:51,330 I can't see the future. There is a chance that Chipotle 842 00:42:51,330 --> 00:42:54,650 gets disrupted, that it goes out of business or something very 843 00:42:54,650 --> 00:42:56,890 bad happens to it. Although I think that's 844 00:42:56,890 --> 00:42:58,850 unlikely, there's always a chance. 845 00:42:59,010 --> 00:43:02,130 Now one last thing I have to mention, I did clean up some 846 00:43:02,130 --> 00:43:05,570 parts of My Portfolio by selling off non core positions. 847 00:43:05,890 --> 00:43:10,010 I had some very small holdings in Pepsi, Nike and Estee Lauder. 848 00:43:10,430 --> 00:43:13,390 When I say small, I mean these were just a couple $1000. 849 00:43:13,390 --> 00:43:15,350 They were less than 1% of the portfolio. 850 00:43:15,790 --> 00:43:17,870 All three of these I made gains in. 851 00:43:18,030 --> 00:43:20,030 I made pretty big gains in all three of them. 852 00:43:20,350 --> 00:43:24,110 So I sold Estee Lauder at a $1400 gain. 853 00:43:24,110 --> 00:43:29,030 I sold Nike at a $1300 gain. I sold Pepsi at an $820 gain. 854 00:43:29,350 --> 00:43:32,590 And I also recently sold the remainder of my Starbucks at a 855 00:43:32,590 --> 00:43:36,390 $3369 gain. So I sold out of these companies 856 00:43:36,390 --> 00:43:38,950 just to consolidate and sell off non core positions. 857 00:43:39,290 --> 00:43:42,250 They're still great companies. They're still on my watch lists 858 00:43:42,250 --> 00:43:44,730 and I'll be keeping U with these companies in the future. 859 00:43:45,050 --> 00:43:46,770 O that's up for now. I hope you enjoyed the episode 860 00:43:46,770 --> 00:43:48,410 in the analysis. I'll see you in the next one.