Debt Ceiling Talks Close To A Deal

THE WEEK IN REVIEW Every Sunday Starting At 8am PT / 11am ET Every week we review the rollercoaster ride that is the most dynamic stock market in history. We review, in detail, the best options and equity plays of the week. Your host, Mike Anderson, will provide a step by step breakdown of how these winning trades were first identified and how they were timed. Understanding how these trades are made will help you to identify similar trends and have confidence in executing your own successful trades. Plus: Bring your ticker and we will use Trade Algo's proprietary algorithms to help you analyze that trade you've been thinking about. [JOIN OUR LIVE TRADING SESSION @ 8am PT / 11am ET!](~/AASl5QA~/RgRmVatFP0SLaHR0cHM6Ly9iaXQubHkvVEFMaXZlRFM4P3V0bV9zb3VyY2U9S2xhdml5byZ1dG1fbWVkaXVtPWNhbXBhaWduJl9reD1USkZ4LTA2cmJ4eDZVYUpjX0xnX2poSExoaHI2azIwbFpVVlJ1dWRPOEJBR1c2VzVaWVFrWkw4SU9aWk9mQVRvLlc1cEFaV1cDc3BjQgpkYkUmc2SH-AfSUht0cmlzdHJhbWJhbGR3aW44OEBnbWFpbC5jb21YBAAEC1Y~) [Shadow] Hello investor, House Speaker Kevin McCarthy said there are still remaining issues in a debt ceiling deal, but he is confident that a deal will be struck before a June 5 deadline. He warned that the deal won’t make everybody happy but will cut “runaway spending.” - “Not everyone will like what’s in the agreement,” McCarthy said. “We will get there when we get it right.” Some analysts predict that the stock market could rally if a deal is reached. Big Tech companies, such as Microsoft, Apple, Amazon and Alphabet, have been holding the markets up. Investors flocked to these names since they may have steadier growth versus many other sectors. But the question is whether other sectors would rally to support the market. (Photo: Saul Loeb | AFP | Getty Images) Will AI rally continue? Mark Haefele of UBS Global Wealth Management said AI is “fueling growth” in many different companies. Nvidia is the poster boy. The company reported a huge revenue boost from the demand for its AI chips. So, Mark expects AI to jump-start several companies’ revenue down the road. - “AI is fueling growth for a wide range of companies, including semiconductors and cloud computing,” wrote Mark Haefele, CIO at UBS Global Wealth Management. - “The broad AI hardware and services market was nearly USD 36bn in 2020, based on IDC and Bloomberg Intelligence data We expect the market to grow by 20% CAGR to reach USD 90bn by 2025.” - “So, we don’t see the AI-related rally as unsustainable,” Haefele said. Mark Haefele, CIO at UBS Global Wealth Management (Photo: Bloomberg) Invest In This Pure Play Of The Hottest Category In Retailing Today’s Stock Pick: Ulta Beauty, Inc. ([ULTA](~/AASl5QA~/RgRmVatFP0SfaHR0cHM6Ly9kYXNoYm9hcmQudHJhZGVhbGdvLmNvbS9jb21wYW55L1VMVEE_dXRtX3NvdXJjZT1LbGF2aXlvJnV0bV9tZWRpdW09Y2FtcGFpZ24mX2t4PVRKRngtMDZyYnh4NlVhSmNfTGdfamhITGhocjZrMjBsWlVWUnV1ZE84QkFHVzZXNVpZUWtaTDhJT1paT2ZBVG8uVzVwQVpXVwNzcGNCCmRiRSZzZIf4B9JSG3RyaXN0cmFtYmFsZHdpbjg4QGdtYWlsLmNvbVgEAAQLVg~~)) Consumers are going to keep buying makeups even if inflation is eating into their wallets. Now, listen. We’ve heard some companies warning about consumers trading down to cheaper brands. Or even stores. Maybe a middle-income consumer would shop at a premium store, but now, they are choosing discount stores like Walmart or Costco. But Ulta Beauty is in a unique position. As the “everything for beauty,” it has beauty products for every pricing tier – Mass, Mass-Tige and Prestige. There’s something for everyone. Brands include CeraVe, Neutrogena, The Ordinary, ColourPop, Kiehl’s and Fenty Beauty by Rihanna. (Source: Ulta Beauty) So, consumers can trade down to cheaper brands while shopping at the same store as Ulta Beauty. - “As we have seen in previous quarters, sales in our mass category grew faster than prestige categories. It is difficult to know with certainty if the robust growth of mass products is due to strong engagement with innovative mass brands such as e.l.f. and La Roche-Posay or due to increased consumer price sensitivity. - “Importantly, Ulta Beauty is the only beauty retailer that offers a wide variety of price points from entry level mass to luxury and everything in between.” said CEO Dave Kimbell. It is perhaps the best-known brand for a pure-play on beauty retailing, and its revenue saw an incredible compounding growth since 2013: (Source: MacroTrends) What makes Ulta Beauty special is how it mastered the art of omnichannel marketing. Literally, omnichannel is the middle name for this brand. It has sprawling store footprints, the number one web traffic for beauty-related retailers, and a powerful loyalty program. Ulta invested in enhancing its CRM capabilities to develop a stronger lifecycle marketing strategy, driving more loyal shopping behaviors through promotional activity with precision. How? Leveraging the predictive decisioning tech to target segments with personalized messaging and offers to boost frequency and higher lifetime value. And Ulta has multiple ways to drive customers – through in-store, digital, and partnerships. Same-day delivery: Believe it or not, Ulta is rolling out same-day delivery in 18 markets. This creates an enormous competitive advantage because very few competitors (physical retailers or e-commerce companies) have the scale capacity to offer same-day delivery. The biggest advantage is in Ulta’s network of retail stores. More than a third of its digital orders were fulfilled by stores, saving costs for warehouses and delivery (because it’s closer to a consumer’s home). Brand equity: Brand equity is a strong weapon to build a competitive moat. Ulta wants to promote inclusivity in beauty to build an emotional connection with its consumers. It created content across paid, owned, and earned media with relevant conversations about beauty and promote inclusivity and positivity. What was one result of this effort? An incredible Return on Equity that would make Warren Buffett drool. Ulta had an ROE above 20% from 2011 to 2020, reaching above 30% prior to the pandemic! Now, it has bounced back for an ROE of above 60%. (Source: MacroTrends) And it leads to an enviable loyalty program. Ulta had 40 million of members at the end of 2022, which was simply incredible. Moreover, about 95% of total Ulta Beauty sales were made by Ultamate Rewards members! (Source: Ulta Beauty) Naturally, it also led to a compounding net income growth: (Source: MacroTrends) Is Ulta Beauty approaching a saturation point? Not at all. The beauty products market is massive and fragmented. Ulta is in the Specialty Beauty category, and it is only 15% of 2021’s distribution of beauty and personal care by channel. (Source: Ulta Beauty) Shareholder-friendly company: Armed with powerful business economies, Ulta has a plenty of cash to reward shareholders through share buybacks. In 2022 alone, it bought back about 4.3% of its current market cap. And it wasn’t a one-time thing. Ulta had reliably bought back shares since 2017. (Source: Ulta Beauty) Bottom line: Ulta Beauty checks off nearly every box of a “dream business.” You do not need to hope for a miracle. All you need is for Ulta to simply continue its performance in the next few years. It’s far easier to maintain an existing behavior than it is to create new ones. Buy and hold this stock. Ulta will work its compounding magic to keep growing your portfolio steadily over the years. 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