A Fragrant Stock Pick

After a see-saw week, global stock markets closed last Friday on a high note.

The Dow Jones rose 1.11%, S&P 500 gained 0.91% and the NASDAQ jumped 2.60%. The MCSI Emerging Markets Index closed its strongest week in a long time, up 3.15%.

With the instability in the market working against us, it’s tough to find true Bull Market Alert stocks.

For that, you need a rifle-shot approach whereby you identify a stock that bucks the overall market trend thanks to strong fundamentals.

This week’s Bull Market Alert recommendation, ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA), is an example of just such an approach.

ULTA Salon Cosmetics is one of the largest beauty retailers in the United States and provides a range of beauty products that are available under one roof. It offers everything from makeup to salon-quality hair products to designer fragrances. ULTA stores even offer a premium salon experience, with hairstyling, skin treatments, and gel manicures among other beauty services.

ULTA has carved out a comfortable spot for itself in the increasingly competitive beauty market, beating out bargain brands like Wal-Mart Stores Inc. (WMT) and Walgreens Boots Alliance Inc. (WBA), as well as department stores like Macy’s Inc. (M) and Nordstrom Inc. (JWN).

CEO Mary Dillon continues to attract praise from analysts. Back in 2014, she unveiled a long-term plan to expand the company to 1,200 locations by 2019 and to grow e-commerce sales by 10% by the same year. She’s well on track to meeting those goals.

Last week, ULTA posted its second-quarter earnings results, beating analysts’ estimates across the board.

The company reported $74.2 million, or $1.15 per share, on revenue that increased 19.4% to $877 million for the most recent quarter. Comparable-store sales rose a whopping 10.1%.

Of course, the biggest area of concern with ULTA stock is the overall market. On Friday, the stock closed near its low, falling 0.8% after rising nearly 6% intraday.

That, however, takes nothing away from Morgan Stanley’s price target of $180 on the stock — a solid 13.2% upside from current levels. Still, it could be a volatile ride.

So buy ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA) at market today and place your stop at $145.

If you want to play the options, I recommend the December $160 calls (ULTA151218C00160000), which last traded at $11.22 and expire on Dec. 18.

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