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Ulta is the Top Performing Chicago-Area Stock for 2011

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PraveenP   Friday, 01/27/12 02:04:07 PM
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Ulta is the Top Performing Chicago-Area Stock for 2011

The Chicago Tribune recently had an article listing the best-performing 2011 stocks among Chicago area-based companies.

The number 1 performing stock was Ulta Salon, Cosmetics, and Fragrance, Inc. (ULTA). The stock was up 91% in 2011.

Ulta has been called the "Best Buy" of the beauty market. It offers one-stop shopping for cosmetics at every price range, as well as a full-service hair salon.

It is a classic example of a growth stock.

On one hand, some analysts feel it could sell off this year because it trades at 32 times estimated earnings. Also, they may face competition as Walgreens and CVS increase their beauty product offerings, and from women shopping online.

On the other hand, the reason for their success is the fundamental shift of women going from malls to strip malls. Most high-end beauty products used to be bought from department stores. Now, women like the convenience of being able to drive up to an Ulta in a strip mall and find all products in one place.

As a result, Ulta is growing at a fast pace. They currently have 449 stores, and have room to expand - especially on the East Coast and Northwest. They plan to increase their number of stores by 15 - 20% a year until they reach 1,000 stores.

At the same time, they recently experienced a 12.6% increase in sales open at least one year.

In addition, since their stores average 10,000 square feet, they are experimenting with launching 300 square foot stores inside devoted to men's skin care and grooming products.

You can look to buy it on a drop for a GAARP play (Growth at a reasonable price) or buy it now as a growth play. Either way, you could then manage it with the "Stock Trading Riches" or AIM formula to play the fluctuations, and pump money out to enhance your return, while reducing your risk/cost basis.

Praveen Puri
Author of "Stock Trading Riches"
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