Saturday, April 12, 2008

Passion first, Profits will follow

Yeah it's probably a bit idealistic of me, but I don't think it makes it any less true. For companies to succeed, they have to be more than what others offer. More importantly, I think passion is infectious. While I think infusing values into your product is sometimes dangerous, it also depends on what those values are. On that meme, consider Chipotle:

Good food wrapped in a socially responsible message has created legions of Chipotle fans -- and a superhot business. Acquired by McDonald's in 1998 when there were only 14 Chipotles, the company went public in 2006 with 500 stores and watched its stock rise from $22 to $110 in 18 months. The now-independent outfit is enjoying an 80% revenue run-up over three years, and by year's end, it will have 840 stores and top $1 billion in annual sales.
That said, a p/e multiple of nearly 52 is a bit rich for my blood at a price of $110 according to Google Finance. An alternative is their B class shares which have 10x the voting power (a class of shares formerly owned by McDonald's and then spun off), though not cheaper at a price of $97 and p/e multiple of 47. There's gotta be an arbitrage opportunity in there though.

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