Do You Believe in the Long-Term Growth Opportunity of Ulta Beauty (ULTA)?

Diamond Hill Capital, an investment management company, released its “Long-Short Strategy” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The market was mixed in the first quarter of 2025, due to the uncertainty caused by the new administration’s avalanche of activity. However, the portfolio outperformed the Russell 1000 Index and the blended benchmark (60% Russell 1000 Index/40% Bloomberg US Treasury Bills 1-3 Month Index) in the quarter. In Q1, both long and short books generated relative tailwinds, with the short book underperforming the index, while the long book was positive, despite the index being negative. In addition, you may look at the fund’s top 5 holdings to learn about its best picks in 2025.

In its first-quarter 2025 investor letter, Diamond Hill Long-Short Strategy highlighted stocks such as Ulta Beauty, Inc. (NASDAQ:ULTA). Ulta Beauty, Inc. (NASDAQ:ULTA) is a US-based specialty beauty retailer. The one-month return of Ulta Beauty, Inc. (NASDAQ:ULTA) was 11.93%, and its shares gained 21.48% of their value over the last 52 weeks. On June 23, 2025, Ulta Beauty, Inc. (NASDAQ:ULTA) stock closed at $471.56 per share, with a market capitalization of $21.195 billion.

Diamond Hill Long-Short Strategy stated the following regarding Ulta Beauty, Inc. (NASDAQ:ULTA) in its Q1 2025 investor letter:

“Our bottom individual Q1 contributors were all from our long book, including lululemon athletica and Ulta Beauty, Inc. (NASDAQ:ULTA). Specialty beauty retailer Ulta Beauty is delivering solid results, with earnings ahead of expectations and guidance for this year consistent. Shares seem to have declined in Q1 largely in sympathy with weaker sentiment surrounding the broad consumer discretionary sector. However, we maintain our conviction in Ulta’s long-term opportunity to take share given its compelling portfolio of beauty brands across a range of price points, including its own private-label brand.”

Jim Cramer on Ulta Beauty (ULTA): “Please Don't Trade It, Just Own It”

A photograph of a customer testing out different products in the skincare aisle at a store.

Ulta Beauty, Inc. (NASDAQ:ULTA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held Ulta Beauty, Inc. (NASDAQ:ULTA) at the end of the first quarter, which was 47 in the previous quarter. In the first quarter, Ulta Beauty, Inc.’s (NASDAQ:ULTA) net sales increased 4.5% to $2.8 billion. While we acknowledge the potential of Ulta Beauty, Inc. (NASDAQ:ULTA) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Ulta Beauty, Inc. (NASDAQ:ULTA) and shared the list of stocks Wall Street is talking about these days. Diamond Hill Long-Short Fund established a long position in Ulta Beauty, Inc. (NASDAQ:ULTA) during Q2 2024. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of ULTA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.