A Green Light From The Fed?

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Stocks hit new all-time highs after the Federal Reserve signaled that rate cuts remain on track for this year, sparking the speculation that it could boost corporate profits. Notably, diverse sectors rallied yesterday — not limited to Big Tech stocks. It is a sign of strength in the market when other sectors rally since Big Tech stocks can’t carry the market forever. Back to the Federal Reserve. The central bank released its officials’ quarterly projections, and they still expect three rate cuts in 2024 and moved toward slowing the pace of reducing their bond holdings. All of this showed that officials still think the recent acceleration in inflation may be an outlier and not an indication of a new trend. Lastly, Fed Chair Jerome Powell said he expects to start cutting rates “at some point this year.” - “The sum total of this ‘no news is good news’ press conference is that markets continue to have a green light to run higher,” said Chris Zaccarelli at Independent Advisor Alliance. “This Fed isn’t going to stand in the way of the bull market.” Chris Zaccarelli at Independent Advisor Alliance (Photo: Bloomberg) Now, it is on jobless claims and existing home sales due to be out this morning. Traders are worrying about two things — a cooling economy and rising inflation. The economy has shown some signs of cooling down, which would bolster the case for rate cuts. But of course, the central bank needs to see inflation easing before officials are comfortable with cutting rates. So, upcoming economic data that shed some clues on these two main drivers will receive the most attention over the next few weeks. A High ROE Stock To Own Right Now Today’s Stock Pick: Ulta Beauty, Inc. (ULTA) Ulta Beauty is in a unique position as we are entering a time of economic uncertainty. 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) It is perhaps the best-known brand for a pure-play on beauty retailing, and its revenue saw an incredible compounding growth since 2014: (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) 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. 2023 was another strong year of share buybacks. In the fourth quarter of fiscal 2023, Ulta Beauty bought back shares at a cost of $159 million and a total of $1 billion for fiscal 2023. The board just approved a new share repurchase authorization of $2.0 billion on March 12, 2024. That is just under 10% of its market cap of $25 billion. 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.   [EARN WHILE YOU LEARN! JOIN OUR FREE LIVE TRADING SESSION!](     © All Rights Reserved, Trade Alliance [Unsubscribe]( | [Manage Preferences](