Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) shares have skyrocketed by more than 9% this morning after the company handily beating the Street’s estimates with its first quarter financial results. The Illinois-based beauty chain reported EPS of $1.45, much better than analysts’ consensus estimate of $1.29. Revenue in the quarter was $1.07 billion, topping the consensus estimate of $1.03 billion. Comparable-store sales increased by 15.2% year-over-year. Mary Dillon, Chief Executive Officer of Ulta Salon, said that the company is off to a “phenomenal start” in 2016. She said that in the first quarter, Ulta Salon experienced the best comparable-store sales growth in its history as a public company. Some of the factors which helped Ulta Salon to its strong performance were growing demand for beauty products and strong execution of its growth strategies.
At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) shareholders have witnessed an increase in hedge fund sentiment lately. At the end of the first quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a 3% increase from three months earlier. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as American Water Works Co., Inc. (NYSE:AWK), Grupo Financero Sntdr Mxco SAB de CV ADR (NYSE:BSMX), and Agrium Inc. (USA) (NYSE:AGU) to gather more data points.
Follow Ulta Beauty Inc. (NASDAQ:ULTA)
Follow Ulta Beauty Inc. (NASDAQ:ULTA)
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 $651.5 million position in the stock, comprising 3.2% of its 13F portfolio. On Lone Pine Capital’s heels is Blue Ridge Capital, led by John Griffin, holding a $198.2 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism encompass John Overdeck and David Siegel’s Two Sigma Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
On the next page we’ll look at some funds that took up positions in Ulta Salon during Q1, as well as compare the stock to a handful of others with similar market caps.
As industrywide interest jumped, some big names have been driving this bullishness. PDT Partners, managed by Peter Muller, assembled the largest position in Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA). PDT Partners had $13.4 million invested in the company at the end of the quarter. Vivek Mehta and Aaron Husock’s ShearLink Capital also initiated a $9.9 million position during the quarter. The following funds were also among the new ULTA investors: Gregg Moskowitz’s Interval Partners, Louis Bacon’s Moore Global Investments, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) but similarly valued. These stocks are American Water Works Co., Inc. (NYSE:AWK), Grupo Financero Sntdr Mxco SAB de CV ADR (NYSE:BSMX), Agrium Inc. (USA) (NYSE:AGU), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks’ market caps are closest to ULTA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AWK | 21 | 329674 | 2 |
| BSMX | 8 | 20761 | 0 |
| AGU | 23 | 452485 | 1 |
| UHS | 38 | 1088962 | 2 |
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 $473 million. That figure was $1.80 billion in ULTA’s case. Universal Health Services, Inc. (NYSE:UHS) is the most popular stock in this table. On the other hand Grupo Financero Sntdr Mxco SAB de CV ADR (NYSE:BSMX) is the least popular one with only 8 bullish hedge fund positions. While Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) is not the most popular stock in this group, hedge fund interest is still above average and it has far more money invested in it than any of the other stocks. 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.
Disclosure: None
