Is Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA) A Good Stock To Buy?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA).

Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) shareholders have witnessed an increase in enthusiasm from smart money of late. ULTA was in 40 hedge funds’ portfolios at the end of September. There were 36 hedge funds in our database with ULTA holdings at the end of the previous quarter. At the end of this article we will also compare ULTA to other stocks including Genuine Parts Company (NYSE:GPC), Northern Trust Corporation (NASDAQ:NTRS), and TD Ameritrade Holding Corp. (NYSE:AMTD) to get a better sense of its popularity.

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Now, let’s go over the fresh action regarding Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA).

How have hedgies been trading Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA)?

At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from one quarter earlier. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Lone Pine Capital, managed by Stephen Mandel, holds the number one position in Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA). Lone Pine Capital has a $702.2 million position in the stock, comprising 3.1% of its 13F portfolio. Sitting at the No. 2 spot is John Griffin of Blue Ridge Capital, with a $251.5 million position; 3% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish consist of Principal Global Investors’ Columbus Circle Investors, John Overdeck and David Siegel’s Two Sigma Advisors and Robert Pohly’s Samlyn Capital.

Consequently, key hedge funds have jumped into Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) headfirst. Scopus Asset Management, managed by Alexander Mitchell, initiated the most outsized position in Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA). Scopus Asset Management had $64.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $47.1 million investment in the stock during the quarter. The other funds with brand new ULTA positions are Anand Parekh’s Alyeska Investment Group, Richard Chilton’s Chilton Investment Company, and Guy Shahar’s DSAM Partners.

Let’s now review hedge fund activity in other stocks similar to Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA). We will take a look at Genuine Parts Company (NYSE:GPC), Northern Trust Corporation (NASDAQ:NTRS), TD Ameritrade Holding Corp. (NYSE:AMTD), and Grupo Televisa SAB (ADR) (NYSE:TV). This group of stocks’ market valuations are closest to ULTA’s market valuation.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $705 million. That figure was $2.04 billion in ULTA’s case. Northern Trust Corporation (NASDAQ:NTRS) is the most popular stock in this table. On the other hand TD Ameritrade Holding Corp. (NYSE:AMTD) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.