5 Best Cyclical Stocks for Inflation

4. Ulta Beauty, Inc. (NASDAQ:ULTA)

Number of Hedge Fund Holders: 48

Ulta Beauty, Inc. (NASDAQ:ULTA) is a US-based retailer of beauty products. The specialty retail industry is highly cyclical. However, the company has the power to pass on its rising costs due to inflation to its customers. Brand loyalty is another factor that helps Ulta Beauty, Inc. (NASDAQ:ULTA) curb current inflation effects. The Ultamate Rewards Loyalty Program has over 37 million members, responsible for 95% of the company’s total sales. 

According to our database, 48 hedge funds were bullish on Ulta Beauty, Inc. (NASDAQ:ULTA) in Q1 2022, while the number was down at 37 in the previous quarter. Arrowstreet Capital was the largest shareholder in the company in Q1 of 2022, with 503,580 shares worth $200.5 million. 

On June 29, Raymond James analyst Olivia Tong raised her price target on Ulta Beauty, Inc. (NASDAQ:ULTA) to $485 from $475 and upgraded the company shares to a Strong Buy rating from Outperform. The analyst believes that the company is “particularly well-positioned” in the current inflationary situation as 40% of Ulta Beauty, Inc. (NASDAQ:ULTA)’s loyal customer base has a household income of more than $100,000. She added that the company is well-positioned if the economy falls into a recession.

Here is what ClearBridge investments had to say about Ulta Beauty, Inc. (NASDAQ:ULTA) in its Q4 2021 investor letter:

“Several encouraging macro trends are emerging in support of two areas outside tech: consumer spending and industrial production. Unlike in past recessions and recoveries, consumer balance sheets have actually improved dramatically since the onset of the pandemic. This should feed through to increased spending on discretionary items offered by retailers like Ulta Beauty. We expect the supply chain constraints contributing to inflation and goods shortages will begin to lessen with an ambitious rebuilding of inventories.”