Stock Spotlight June
High-Quality Investment ideas from my investable universe at attractive levels
Introducing "Stock Spotlight" – A monthly compilation of High-Quality Investment Ideas
In this new format, I'll highlight a few opportunities that have emerged or are ongoing within my investable universe. Each spotlight will include a quick explanation of the business, why it's compelling and my approach to its valuation. The first idea is free for all subscribers, with additional ideas exclusively for paying subscribers. The number of ideas will vary based on market conditions each month.
To kick off this new format, use the 15% discount code below for an annual subscription!
Free Idea of the Month: Ulta Beauty
Ulta Beauty is a leading omnichannel retailer of beauty and care products. The company currently operates only in the US but plans to expand into Mexico in the coming years via a joint venture. Ulta deploys all its excess free cash flow into stock buybacks, making it a compelling buy after a recent price drop and little growth priced into the shares.
The growth runway is uncertain because the US store network is mature and international expansion isn't a certainty for success due to a competitive environment and cultural differences in Mexico. Ulta doesn’t come without risks, however, with just mid-single-digit growth priced in and an FCF yield of around 5% (>7% owner earnings yield due to high growth/remodeling capex and working capital changes), Ulta doesn't sound like a bad idea at a 12% discount rate. You can read my full deep dive into Ulta here.
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