Shares of Chipotle (NYSE: CMG) have risen more than fivefold over the past five years. That performance and an almost $700 price tag solidify Chipotle’s status as storied, once-in-a-lifetime consumer discretionary growth stock on par with Netflix (NasdaqGS: NFLX) and Priceline (NasdaqGS: PCLN).
However, with Chipotle set to deliver its first-quarter earnings today after the close of U.S. markets, exchange traded fund investors are reminded of the difficulties of accessing the burrito maker’s shares via ETFs.
Just two ETFs feature Chipotle as a top 10 holding, according to S&P Capital IQ data. The PowerShares Dynamic Leisure and Entertainment Portfolio (NYSEArca: PEJ), which in the past has garnered weights of roughly 5% or more to Chipotle, currently does not own shares of the stock.
Lack of ETF access to Chipotle is punitive given the company’s penchant for delivering blow-out results.
“Consensus estimates call for EPS of $3.64, vs $2.64 a year earlier (+38%). The company has beat estimates in the past three quarters. Consensus for all-important comparable-store sales is +11.6%. This compares with with +16.1% in the fourth quarter of fiscal 2014. The other metric to watch out for is gross margin – in the fourth quarter, food costs grew 110bps and held back margin progression,” said Mischler Financial Group analyst Neil Currie in a note out today.
“Regarding comp-store sales, we think there is some potential for consensus to be beat. While the consensus estimate would represent a two-year stack of +25.0%, similar to Q4, we think three-year stacks have proved an important metric for CMG. Based on this consensus, the three-year stack would be +26.0%. This compares with around +30.0% for the past three quarters. It is conceivable that CMG’s reported comp-store sales could reach the 14-15% mark on this basis,” adds Currie. [Leisure ETF Gets a Lift]
Chipotle’s market value is, at this writing, nearly $22 billion, meaning its dwarfed in traditional cap-weighted consumer discretionary ETFs, such as the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY), by the likes of Walt Disney (NYSE: DIS), Home Depot (NYSE: HD) and Amazon (NasdaqGS: AMZN).
Alright, so Chipotle commanding a weight of less 0.92% in an ETF like XLY is understandable given the restrictions of cap weighting. Momentum-based discretionary sector ETFs, such as PEJ and thePowerShares DWA Consumer Cyclicals Momentum Portfolio (NYSEArca: PEZ), make for plausible homes for the burrito giant. [Burritos, Coffee and Donuts in This ETF]
However, those ETFs have opted for the likes of Sonic (NasdqGS: SONC), Jack in the Box (NasdaqGS: JACK) and Domino’s Pizza (NYSE: DPZ), among others, over Chipotle.
Chipotle fitting the bill as an ideal holding for a momentum ETF is confirmed by the fact that it commands a weight of nearly 1.7% in the $1.91 billion Powershares DWA Momentum Portfolio (NYSEArca: PDP).
PDP, which debuted in March 2007, tracks the Dorsey Wright Technical Leaders Index, “which takes into account, among other factors, the performance of each of the approximately 1,000 largest companies in the eligible universe as compared to a benchmark index, and the relative performance of industry sectors and sub-sectors,” according to PowerShares.
In seven of the past eight years, PDP has topped the S&P 500. Now it can lay claim to being one of a scant amount of ETFs with somewhat decent Chipotle exposure.
Powershares DWA Momentum Portfolio