ULTA BEAUTY, INC.

246.85 -4.58 (-1.86%) Sell

ULTA is a falling knife, continues to bleed every investor trying to catch it

13 min read

ULTA was among the worst performers today. On a longer term basis, investors in ULTA BEAUTY, INC. made -0.04% per day. Friday's performance of -1.86% was a significant underperformance compared to it's daily average.

[Themes containing ULTA]

ULTA showed a strong down trend over the last 3 months. During this period ULTA returned -12.29% and saw a maximum drawdown of -21.45%. There was a short signal during this period which returned +2.99%.

Trend

ULTA has been underperforming the SP500 index in recent time, after having outperformed till 5 Jun, 2017. Over the last 2 years 11 months and 10 days, ULTA outperformed the SP500 index on 51% days.

During the last three months ULTA was mostly loss making and delivered on average -0.18% per day. It's best return during this period (of +4.81%) was on Thursday, 8 Nov, 2018. While it's worst loss in the same period (of -13.13%) was on Friday, 7 Dec, 2018. There was initially a bullish trend during this period which started on 26 Sep, 2018 and went on till 1 Oct, 2018. The bullish trend returned +1.97% to investors. This was followed by a bearish trend that started on 2 Oct, 2018 and ended on 5 Oct, 2018. This bearish trend lost -4.71% of investor capital.

On monthly basis, ULTA delivered profits and losses in equal number of months. ULTA delivered profits less regularly than SP500 index. ULTA significantly outperformed SP500 index in Apr 2018, when it returned +23.52% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. ULTA had a shorter streak of profitable months than SP500 index. It only went up in 3 straight months during the last year. It is interesting to note that both ULTA and SP500 index significantly outperform during months when quarterly/annual results are announced.

The individual investor should act consistently as an investor and not as a speculator.
-- Ben Graham

ULTA is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in ULTA's volatility from 2 Oct, 2018 to 8 Nov, 2018. While there was a significant surge in the SP500 index's volatility from 25 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that ULTA has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

Investors trading in ULTA derivatives at this moment can consider 'Bull Call Spread' options strategy to receive better risk-adjusted returns.

SP500 index has more chance of extreme outcomes than ULTA. Therefore, SP500 must receive a lower allocation than ULTA in your portfolio. SP500 index usually has shorter drawdown period than ULTA.

On a general note (since you are interested in ULTA), two instruments that have been extremely volatile in recent times are GNK and VIPS. Investors in these instruments should consider reducing their exposure (to GNK and VIPS) and diversifying their portfolios.

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