Top Funds Roll Out The Red Carpet For Retailer In New Buy Zone

The latest list of new buys by the best mutual funds featured 19 retail stocks, including Wingstop (WING), BJ’s Wholesale Club (BJ) and AutoZone (AZO). Top money managers also rolled out the red carpet for Ulta Beauty (ULTA).

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Fidelity Contrafund (FCNTX) has a position in the company, and 36 funds with an A+ rating from IBD own shares of Ulta stock.

Further proving the purveyor of beauty products is ready for its close-up, Ulta stock has entered a new buy zone and earned a spot on the IBD Breakout Stocks Index.

With a 94 Composite Rating, Ulta Beauty earns top billing in IBD Stock Checkup within the specialty retailers industry.

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Who Joins Ulta Beauty On The IBD Breakout Stocks Index?

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Ulta Beauty Widens Beauty Lens With Multifaceted Campaign

Headquartered in Illinois, Ulta Beauty is the largest beauty retailer in the U.S. It sells mass and prestige cosmetics and fragrances as well as skin care and hair care products. It also provides salon services.

Through over 1,250 stories and Ulta.com, the company offers more than 25,000 products. As of its investor presentation in March, Ulta Beauty has roughly 37 million members in its Ultimate Rewards loyalty program.

In August, the retailer launched Beauty&, a multifaceted campaign designed to widen the lens of beauty and inspire everyone to reclaim beauty on their own terms. The initiative aims to empower people through creative content, a podcast debut, mental health support and cultural influencers such as Meena Harris.

As noted when Ulta was featured in the IBD Stock Analysis in June, during the pandemic in 2020, Ulta and other beauty retailers got hurt as people wore masks and less makeup. But Ulta bounced back in 2021 and this year.

Over the last six quarters, the company has posted solid double-digit sales growth. However, revenue gains have decelerated, coming in at 17% in fiscal 2022 Q2, ended July 30. Still, Ulta Beauty earns an A SMR Rating, which tracks sales growth, profit margins and return on equity.

Over the last three years, Ulta has posted average annual earnings growth of 32%. Analysts forecast 19% EPS growth for the current fiscal year.

Ulta Stock Highlights New Buy Zone

Since the beginning of 2021, Ulta stock has climbed gradually, forming multiple chart patterns along the way. It has generally found — or quickly recaptured — support at its 40- and 10-week moving averages.

The stock has most recently formed a cup with handle showing a 426.99 buy point.  This month, Ulta Beauty has tested that entry multiple times and currently trades above it, in the buy zone.

The relative strength line remains within striking distance of a new 52-week high. And in a sign of rebounding technical strength, the 21-day moving average has moved back above the longer-term 50-day line.

IBD Breakout Opportunities ETF

The IBD Breakout Opportunities ETF from Innovator Capital Management tracks the IBD Breakout Stocks Index. As with other index ETFs, this fund allows you to invest in the entire index in addition to, or rather than, buying individual stocks. Learn more here about the ETF and Innovator funds.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.

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