Is ULTA Stock A Buy or Sell?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 887 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Ulta Beauty, Inc. (NASDAQ:ULTA).

Is ULTA stock a buy or sell? Ulta Beauty, Inc. (NASDAQ:ULTA) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. Ulta Beauty, Inc. (NASDAQ:ULTA) was in 43 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 46. There were 31 hedge funds in our database with ULTA holdings at the end of September. Our calculations also showed that ULTA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Kerr Neilson of Platinum Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a look at the latest hedge fund action encompassing Ulta Beauty, Inc. (NASDAQ:ULTA).

Do Hedge Funds Think ULTA Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 39% from the third quarter of 2020. On the other hand, there were a total of 41 hedge funds with a bullish position in ULTA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ULTA A Good Stock To Buy?

Among these funds, Select Equity Group held the most valuable stake in Ulta Beauty, Inc. (NASDAQ:ULTA), which was worth $586.2 million at the end of the fourth quarter. On the second spot was Holocene Advisors which amassed $181.1 million worth of shares. Two Creeks Capital Management, Junto Capital Management, and Platinum Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kettle Hill Capital Management allocated the biggest weight to Ulta Beauty, Inc. (NASDAQ:ULTA), around 4.81% of its 13F portfolio. Teewinot Capital Advisers is also relatively very bullish on the stock, designating 4.81 percent of its 13F equity portfolio to ULTA.

As aggregate interest increased, key money managers have been driving this bullishness. Junto Capital Management, managed by James Parsons, initiated the largest position in Ulta Beauty, Inc. (NASDAQ:ULTA). Junto Capital Management had $62.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $45.1 million position during the quarter. The other funds with brand new ULTA positions are Jack Woodruff’s Candlestick Capital Management, Steven Boyd’s Armistice Capital, and Sahm Adrangi’s Kerrisdale Capital.

Let’s check out hedge fund activity in other stocks similar to Ulta Beauty, Inc. (NASDAQ:ULTA). These stocks are Steris Plc (NYSE:STE), Horizon Therapeutics Public Limited Company (NASDAQ:HZNP), Occidental Petroleum Corporation (NYSE:OXY), Expeditors International of Washington (NASDAQ:EXPD), PerkinElmer, Inc. (NYSE:PKI), Quest Diagnostics Incorporated (NYSE:DGX), and Nucor Corporation (NYSE:NUE). This group of stocks’ market values are closest to ULTA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STE 36 784186 6
HZNP 55 3793427 -6
OXY 49 2151233 6
EXPD 25 477813 -6
PKI 31 1978722 -5
DGX 45 531778 3
NUE 29 138612 1
Average 38.6 1407967 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.6 hedge funds with bullish positions and the average amount invested in these stocks was $1408 million. That figure was $1341 million in ULTA’s case. Horizon Therapeutics Public Limited Company (NASDAQ:HZNP) is the most popular stock in this table. On the other hand Expeditors International of Washington (NASDAQ:EXPD) is the least popular one with only 25 bullish hedge fund positions. Ulta Beauty, Inc. (NASDAQ:ULTA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ULTA is 68. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on ULTA as the stock returned 12.1% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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