The Case Study of Ulta Cosmetics

In late 2010 Ulta Cosmetics (ULTA) came on my radar as a stock to own. Investors Business Daily had it in the IBD 100, which is now the IBD 50, and a number of investing publications were raving about the strong earnings of this stock. I put it up to the Google Trends test and this is what I found:

ulta-google-trends-chart

Notice the huge jump in search traffic at the end of 2010 and the beginning of 2011. Today, I would like to see five straight years of year over year traffic increases but remember there was a recession back in 2009 causing most consumer discretionary companies to see lower search traffic during 2009 and 2010.

With a Google Trend chart like this, it was obvious the Ulta stock had room to run. If the overall market was strong, Ulta was going to be one of the leaders.

The purchase price for Ulta was $34 a share and in the spring of 2016 Ulta hit $210 a share. This has been one of the strongest retail stocks in the market and it was easily predicted by simply using Google Trends to compare month over month and year over year search trends.

Below you will find the year over year traffic growth for Ulta for the last five years:

ULTA
1/1/2011 26
2/1/2011 27
3/1/2011 26
4/1/2011 29
5/1/2011 29
6/1/2011 29
7/1/2011 32
8/1/2011 30
9/1/2011 29
10/1/2011 30
11/1/2011 37
12/1/2011 51
1/1/2012 32 1.230769231
2/1/2012 32 1.185185185
3/1/2012 31 1.192307692
4/1/2012 32 1.103448276
5/1/2012 32 1.103448276
6/1/2012 34 1.172413793
7/1/2012 35 1.09375
8/1/2012 36 1.2
9/1/2012 35 1.206896552
10/1/2012 34 1.133333333
11/1/2012 44 1.189189189
12/1/2012 52 1.019607843
1/1/2013 35 1.09375
2/1/2013 36 1.125
3/1/2013 37 1.193548387
4/1/2013 36 1.125
5/1/2013 37 1.15625
6/1/2013 37 1.088235294
7/1/2013 40 1.142857143
8/1/2013 41 1.138888889
9/1/2013 38 1.085714286
10/1/2013 39 1.147058824
11/1/2013 50 1.136363636
12/1/2013 70 1.346153846
1/1/2014 43 1.228571429
2/1/2014 42 1.166666667
3/1/2014 46 1.243243243
4/1/2014 45 1.25
5/1/2014 43 1.162162162
6/1/2014 41 1.108108108
7/1/2014 47 1.175
8/1/2014 46 1.12195122
9/1/2014 45 1.184210526
10/1/2014 44 1.128205128
11/1/2014 60 1.2
12/1/2014 80 1.142857143
1/1/2015 51 1.186046512
2/1/2015 49 1.166666667
3/1/2015 52 1.130434783
4/1/2015 52 1.155555556
5/1/2015 51 1.186046512
6/1/2015 49 1.195121951
7/1/2015 56 1.191489362
8/1/2015 54 1.173913043
9/1/2015 55 1.222222222
10/1/2015 54 1.227272727
11/1/2015 75 1.25
12/1/2015 100 1.25
1/1/2016 65 1.274509804
2/1/2016 59 1.204081633
3/1/2016 70 1.346153846

Not only is the traffic at an all time high, it is actually increasing faster than ever before. In March 2016 we saw a 34.6% increase in searches compared to March of 2015. If more people are searching, more people are buying.

Even if you didn’t get into Ulta at $34 a share, there is still room to grow. If you are buying at $210 today you may see a pull back to the 50 or 200 day moving average but this is a company that is going to make tons of money.

If you want to invest in the social media trend this is a great play. With more and more young women hoping to look like Kim Kardashian or Kylie Jenner, Ulta is their cosmetic store of choice. While Walgreens and CVS sell a ton of makeup, Ulta is the best pure makeup play.

For those interested, here is what the current Ulta Google Trends chart looks like:

2016-ulta-google-trends-chart

If you would like more information on stocks to invest in reach out to me at jesse@wojdylosocialmedia.com. I have a number of strong plays that should increase in value over the next six to 12 months.

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