Livestream at 10 ET Today + How Portillo's Caught Fire

First off, there was a typo in the headline of yesterday’s article. My apologies. It has been updated online.

I promised more video content this year and today is the start. I am doing a live show with Jose Najarro, who is an expert on semiconductors and all things NVIDIA. We go live at 10:00 a.m. ET today. You can find us here on YouTube or on Twitter and the replay will be available on YouTube.

PS. The YouTube library is slowly growing and I will send everything there to premium members on Monday.

Portillo’s stock has been one of the worst performers in the Asymmetric Portfolio since entering in 2023, but it’s been on fire over the past month.

What’s changed?

Nothing. And everything.

A big part of the drop was simply a falling valuation as same-store sales went from post-COVID recovery to “Is this company shrinking?” It didn’t help that the company’s valuation was arguably too high in 2023, although I think it’s closer to being too low today.

Valuation and Growth

The valuation was a risk when Portillo’s entered the Asymmetric Portfolio. And it’s a reason I haven’t bought shares often over the past 18 months.

But today’s valuation is much more compelling. The total market cap is slightly over $1 billion (including the B shares owned by Berkshire Partners that are rapidly being eliminated) and with restaurant-level EBITDA reaching $168.1 million in 2024 that’s a compelling price to pay.

Uncertainty Becomes Certainty

The valuation becomes more comfortable when we see same-store restaurant sales go positive. I’m happy management is pushing on price, which has arguably been too low for years, but the declining number of transactions is a concern. This will be my focus in 2025 because the bullish case for Portillo’s is that this is an incredibly popular restaurant.

EBITDA and cash generation should be strong, although that’s going to be poured back into opening a dozen new restaurants in 2025. If same-store sales do turn positive and management starts to see some efficiencies in new areas like Texas, I like the risk/reward here.

Remember that Portillo’s is only a few years into its rapid expansion phase. There’s no leverage on advertising or operations and the build-out team is still getting its footing. But those trends should improve as Texas operations expand and the new store design (smaller and more efficient) is perfected.

This is still a stock with “next Chipotle” potential.

Speaking of Chipotle

The operational updates are nice, but the real reason the stock market suddenly cares about Portillo’s is Chipotle’s longtime CFO Jack Hartung joining the board of directors.

Hartung is leaving Chipotle later this year and entering the board of directors rounds portion of his career, but this is the first restaurant board he has joined. Telling? Maybe.

At the very least, Hartung has more experience than anyone growing a business from a popular niche to an industry giant than anyone at Portillo’s today. Maybe he has some insights that will make this stock live up to its 10x potential.