Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: According to this morning's Wall Street Journal, the fact that shares of Starbucks and Bed, Bath & Beyond are trading "at or near all-time highs" signals it's time for a pullback in consumer stocks, which have "little left in the tank." But just try telling that to Ulta Salon, Cosmetics & Fragrance
Now what: The retailer expects to keep the good news coming in the new year as well, promising $0.30 in Q1 2011 profits -- 10% better than Wall Street has it pegged to earn. To hear the Journal tell it, though, Ulta shareholders should enjoy this good news while it lasts. The U.S. economy is starting to catch fire, throwing off sparks that threaten to inflame labor costs even as they inflate commodity prices, and retail stocks are doomed to underperform in 2011.
As for me, while I applaud management's 2011 performance, I must Ulta-mately side with the Journal on this one. If the eternal question is "what price, Beauty?", I'll answer that 39 times trailing earnings, and 35 times free cash flow, is just too high a price to pay.
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Bath & Beyond and Starbucks are Motley Fool Stock Advisor recommendations. The Fool owns shares of Starbucks. Fool contributor Rich Smith does not have any position in any company named above. The Motley Fool has a disclosure policy.
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