Selling ULTA After 1 Year, January 2022

Today I went ahead and sold all of my ULTA shares.

The price I got was $412. I originally bought the stock when it was $281 back on November 27, 2020. In other words, I realized a gain of over 46%.

Frankly, I’m happy with the performance of the stock but I don’t expect as much upside going forward. The price I sold at is close to the 52-week high of $420.97.

The stock has been quite volatile over the last couple of months, moving up and down between $370 and $420 multiple times.

Some of that may be related to jitters involving Omicron and the effect it could be having on reopening stocks.

That being said, I feel the reopening play has already played out with ULTA. At this point, I don’t see people holding back on make-up purchases.

While some sectors like travel still have more of an upside, cosmetics is a different story. People are out and about and lockdowns are a thing of the past.

Professional women who are forced to work from home because offices are closed are still likely to get on video calls. And they may still go out after hours, even in the absence of festivities. This means putting on make-up is still a daily affair for many.

There may well be reasons to hold on to ULTA stock but those are not readily apparent to me. Based on what I have seen, ULTA is a very nimble player but the cosmetics industry seems to have a lot of competition and I don’t see how ULTA could arrive at and hold on to a dominant position. There isn’t a lot of moat in their business model that would justify a long-term buy and hold approach.

As far as I’m concerned, the initial reason why I bought the stock no longer applies. In a way, my prediction already came to fruition. The stock rallied with reopening last year and now that’s it.

At this point, selling this stock also frees up cash for me to invest in other companies with more potential upside.