Where Massive Share Market Returns Can Be Found

Chipotle Mexican Grill (NYSE: CMG) would very likely not be known amongst most Singaporeans given that the Mexican fast-casual restaurant operator has no presence here in Singapore whatsoever.

But in the USA, where it’s based, it’s a whole different story altogether. Over the past eight years between 2006 and today, sales at the company has more than quadrupled from US$823 million to US$3.39 billion. Even more impressively, the Great Financial Crisis of 2007-09 couldn’t dent the company’s growth as it clocked revenue of US$1.09 billion, US$1.33 billion, and US$1.52 billion in 2007, 2008, and 2009 respectively.

The company has also converted its growing top-line into even faster bottom-line growth with its profit increasing by 707% from US$41.4 million in 2006 to US$334 million over the last 12 months.

With such a strong history of success, it’s perhaps no wonder to see Chipotle Mexican Grill’s shares post market-beating returns; shares of the company have gained 1,187% since the start of February 2006 (it was listed in late January 2006). Comparatively, the S&P 500 (a broad American share market index) has gained just 54% in the same time frame.

Now, here’s an interesting question: What’s the real source of Chipotle Mexican Grill’s outsized return in the share market? It’s probably true that the market’s reflecting all of the company’s past corporate success – as should be the case – but where did that corporate success come from?

Turns out, it might have stemmed from a deep love of food. Chipotle Mexican Grill started out with Mexican fare, as mentioned earlier. But since 2011, it started branching out into Asian cuisine with its Shophouse restaurants. And according to Tim Wildin, the company’s director of concept development, “None of this was driven by market research or customers. Nothing… It would be totally different and it probably wouldn’t be successful. This was driven by a love of really good food.” This fits really well with the company’s past narratives of having always wanted to just prepare really good food.

And, this is where massive share market returns can be found – from a company’s desire to build really great products or services.

In Singapore, an example could perhaps be found in Raffles Medical Group (SGX: R01). Its co-founder, Dr. Loo Choon Yong, once shared this titbit about his company: “We have a little aphorism of our own – “look after the patients and the business will look after itself.” I preach this all the time because we should do what is best of our patients.”

Of course, investors should be sceptical of such statements as companies might not be walking the talk. But with Raffles Medical Group’s case, there’s some evidence to prove that the company’s management might indeed be who they say they are: The company announced in April this year that its flagship Raffles Hopsital had won the highest Customer Satisfaction ratings in the healthcare sector according to a 2013 Customer Satisfaction Index of Singapore (CSISG) survey that was carried out by the Institute of Service Excellence (the hospital scored second place in 2012).

Over the years, Raffles Medical Group has been one of the best healthcare operators in the country. Its shares have also proved to be a great market-beater having gained 746% to S$3.96 since the day it got listed in April 1997; the Straits Times Index (SGX: ^STI) in comparison, has gained just 61% to 3,279 points currently.

Foolish Bottom Line

There are many different ways to spot investing opportunities for the chance to earn great returns; finding companies with a relentless focus on building something great for its customers would be one of them.

This also brings to mind one other observation I have: As important as a company’s financials are, sometimes, it’s outside the numbers and spreadsheets where potential great returns can be found. Intangibles such as management’s purpose and objectives are very important too.

Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool's free investing newsletter. Written by David Kuo, Take Stock Singapore tells you exactly what's happening in today's markets, and shows how you can GROW your wealth in the years ahead.  

The Motley Fool's purpose is to help the world invest, better. Like us on Facebook  to keep up-to-date with our latest news and articles.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in Chipotle Mexican Grill and Raffles Medical Group.