We recently compiled a list of the Cramer’s Morning Thoughts: 20 Stocks to Watch. In this article, we are going to take a look at where Ulta Beauty Inc. (NASDAQ:ULTA) stands against the other stocks to watch according to Jim Cramer.
In a recent episode of Mad Money, Jim Cramer explains that if you’re investing with real money, not just playing a simulation like a stock market game, it’s essential to open a real investment account. Reflecting on his own experience from 1979, he recalls that there were no online accounts back then. Since he already had some money in a Mellon Fund account through Fidelity, he decided to open his individual stock account with them as well.
In the early days of his investing journey, Cramer admits he didn’t have a clear source for stock ideas, so he turned to Forbes, a magazine he trusted. One article caught his eye about American Agronomics, a promising orange-growing company in Florida. It looked like a good opportunity, so he invested in 10 shares. Unfortunately, disaster struck when a frost destroyed the crops, slashing his investment in half. Cramer likens this experience to the storyline of the movie Trading Places. While the loss was painful, he emphasizes that it didn’t crush his determination to keep learning and investing.
“At first, I didn’t know where to look for stock ideas, so I turned to a magazine I liked, Forbes. No offense to Forbes, but I read an interesting article about American Agronomics, a compelling orange grower in Florida. It seemed like a solid pick, so I bought 10 shares. Later, a frost hit, wiping out the crops and cutting my investment in half— a bit like the plot of Trading Places, if you’ve ever seen that classic Eddie Murphy movie. I was devastated but not defeated.”
Jim Cramer’s 1st Investment Lesson: Know What You Own
Jim Cramer shares a story about one of his early investing experiences. After suffering a loss on his previous investment, he sold off his remaining shares and used the leftover money to buy seven shares of Bobby Brooks, a clothing company recommended by Forbes. Unfortunately, the company reported poor financial results, and Cramer lost even more money. At the time, he had a stable job at American Lawyer magazine, earning $20,000 a year, and was living in a small, affordable studio apartment. This low cost of living allowed him to quickly rebuild his stock portfolio despite his earlier losses.
During his work travels, Cramer once had a great breakfast at Bob Evans Farms and discovered the company was publicly traded. Intrigued, he returned to New York and went to the Midtown Manhattan Public Library, where he studied everything he could find about Bob Evans Farms and compared it with other companies in the same industry. Based on this research, he bought 20 shares of the company. His investment paid off when the stock rose after a strong financial quarter and a stock split. Through this experience, Cramer learned an important lesson: “Know what you own.”
“During my travels for work, I once had an amazing breakfast at Bob Evans Farms and learned that the company was publicly traded. When I returned to New York, I visited the Midtown Manhattan Public Library, read everything I could about Bob Evans, and compared it with other companies in the industry. Armed with that research, I bought 20 shares. The stock rose immediately following a good quarter and a stock split. That’s when I learned my first key investment lesson: know what you own.”
From Childhood Curiosity to Financial Empire: The Rise of Jim Cramer
Jim Cramer shared that his passion for stocks didn’t ignite in adulthood after law school or college, or even in high school. It started much earlier, back in the fourth grade. According to him, his father would bring home the Philadelphia Bulletin, one of the largest newspapers in the country at the time. While most kids would eagerly flip to the comics or sports section, Jim was a huge Phillies fan, he found himself intrigued by something else. Curiosity got the best of him.
The business section of the paper, full of lists of names and numbers, looked like an indecipherable code compared to the baseball stats he regularly pored over. Terms like “open,” “range,” and “close” didn’t make any sense to him, so he asked his dad, who had some experience dabbling in the stock market.
His dad encouraged him, and Jim began tracking stock names he heard on the radio, keeping a record of their daily performance in a ledger. For him, it became a fun game of prediction, much like analyzing baseball stats. He didn’t know much about the companies he was tracking, many were defense stocks that were performing well due to the Vietnam War, but it didn’t matter. The thrill of figuring out the next move kept him hooked.
The Stock Game
Not long after, Jim introduced this “stock game” to his fifth-grade class during show-and-tell, showing off his ledger and inviting his classmates to join in the fun. Though not everyone was interested, the lesson was clear: starting early can ignite a lifelong interest. For Cramer, this early exposure to the stock market became the foundation of his love for investing.
“Fast forward a bit, and I introduced this “stock game” to my fifth-grade class during show-and-tell, showing off my ledger and challenging my classmates to play. Not everyone was into it, but the lesson here is clear: get them started early. That’s how I fell in love with the stock market.”
Jim Cramer’s takeaway from his childhood stock obsession is simple: start young. The stock market is a long-term game, and the earlier you get involved, the higher your chances of winning will get.
Our Methodology
This article delves into Jim Cramer’s latest Morning Thoughts posts which list the top stocks Cramer’s watching before the markets open. After going through his posts, we sorted the picks from his watchlist by hedge fund sentiment. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A photograph of a customer testing out different products in the skincare aisle at a store.
Ulta Beauty Inc. (NASDAQ:ULTA)
Number of Hedge Fund Investors: 46
According to the latest Morning Thoughts post, Ulta Beauty Inc. (NASDAQ:ULTA) was recently downgraded from a “buy” to a “hold” rating by TD Cowen due to concerns over slowing same-store sales, commonly known as comps in the retail sector, along with a rise in promotional activity.
“Ulta Beauty was downgraded to hold from buy at TD Cowen on slowing same-store sales, also referred to as comps in the retail industry, and increased promotional activity.”
Ulta Beauty, Inc. (NASDAQ:ULTA) presents a strong investment case, backed by its strategic advantages, despite some challenges noted in its Q2 FY2024 earnings report. Ulta Beauty, Inc. (NASDAQ:ULTA) saw a modest 0.9% increase in net sales, bringing in $2.55 billion, showing resilience in a tough retail environment, even though comparable sales fell by 1.2%. Key strengths include Ulta Beauty, Inc. (NASDAQ:ULTA)’s strong customer loyalty and its ability to drive higher transaction values per purchase.
Ulta Beauty, Inc. (NASDAQ:ULTA) is also expanding its reach, opening 17 new stores in Q2, which brings its total to over 1,400 locations. This helps Ulta Beauty, Inc. (NASDAQ:ULTA) strengthen its presence in both well-established and new markets. Financially, Ulta Beauty, Inc. (NASDAQ:ULTA) remains solid, with $414 million in cash and a commitment to rewarding shareholders. In Q2, Ulta Beauty, Inc. (NASDAQ:ULTA) repurchased nearly 550,000 shares.
To keep up with market shifts, Ulta Beauty, Inc. (NASDAQ:ULTA) is improving its online presence, introducing new brands, and increasing its marketing efforts. While it has adjusted its FY2024 outlook downward due to challenges like lower store traffic and rising costs, these appear manageable given Ulta Beauty, Inc. (NASDAQ:ULTA)’s strong market position and long-term strategy. This could present a good opportunity for investors to buy at a lower price, especially as Ulta Beauty, Inc. (NASDAQ:ULTA) continues expanding both its physical and digital footprint.
Carillon Eagle Mid Cap Growth Fund stated the following regarding Ulta Beauty, Inc. (NASDAQ:ULTA) in its Q2 2024 investor letter:
“Ulta Beauty, Inc. (NASDAQ:ULTA) operates a chain of beauty stores offering cosmetics, fragrance, skin, and hair care products. Management disclosed during the quarter at a conference that business was slowing more than expected and ultimately lowered guidance. This slowdown does not appear to be happening uniformly across the beauty landscape and we are concerned Ulta may be losing market share.”
Overall ULTA ranks 18th on our list of the stocks to watch according to Jim Cramer. While we acknowledge the potential of ULTA as an investment, our conviction lies in the belief that under the radar 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 more promising than ULTA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
