Poker players have an informal saying that if you don't know who the fish is at the table, then the fish is you. The fish at the poker table is the one who merely plays his cards without any regard for his opponents' potential cards. A good poker player thinks about his opponents' cards. The superior poker player is the one who thinks about his opponents' cards and also considers what his opponents think of his own cards.
Investing is very similar in levels of thinking. An elementary investor merely thinks about the individual company and whether or not the consensus opinion is favorable. Superior investors think beyond the box. Not only do they focus intensely on the company and its management, they also think about the industry, the competition and risks that are not widely considered by most. After that, even if the company looks wonderful, they don't invest unless the price is right.
So this brings me back to Chipotle (CMG) , a company I've owned in the past, know very well as a customer and investor, and have written about often, including yesterday when I opined that the analysts are likely wrong on their pessimistic view of the company over the long run.
In addition to thinking about Chipotle as a restaurant, I've thought and studied about the restaurant industry in general. There are shifts going on that most of us might not realize but should be considered. First, thanks to technology and shifts in the economy, more people are working from home. People working at home are probably not going to eat out as much as folks at the office. The thinking is that this shift will harm restaurant growth.
Perhaps, but I also think that advances in food delivery options, such as UberEats, are also likely to increase the convenience of eating out without the hassle of going to the restaurant. Chipotle is leading the way in teaming up with such food delivery providers. Over time, I suspect more of the fast-casual restaurant concepts will make that happen as well.
So Chipotle, like all restaurants, has other risks besides the first-order ones like competition, price and food quality. But the fact remains that people will consume two or three meals a day. And a dinner at Chipotle can be cheaper than buying and cooking at home. The major shift in food has been more awareness on quality without sacrificing taste. Chipotle has done that.
So whether it's restaurants, insurance, energy or retail, you have to go beyond what everyone else thinks about and think about other potential risks and opportunities before making your bet. Superior investors know what they know, know what they don't know, and more importantly know that a great business is not necessarily a great investment.