I sold a stock this week. This is a stock I purchased last week, and sold off earlier this week - ULTA Beauty Stock (ULTA Stock). In this video, I go over an important investing lesson and investing tip I realized here with this decision, what I learn't from it, and how you can prevent making this mistake too. If this video gets 300 likes, I will make a video going over other mistakes I've made during my investing career in the stock market.
ULTA PT Analysis:
I purchased ULTA beauty stock on August 30th (and posted in our VIP Membership Group) and managed to pick up shares at $242.75/share. Some of the reasons I sighted was that the stock was down over 28% that day due to lowered guidance after their ER, and also because it's technicals show it has come down to key levels on the monthly and weekly charts. I also added that I wanted some exposure to this sector as I believe this could be a great opportunity in a company that's growing with a $0 debt balance sheet! ULTA Stock also has a fairly low PE of 20 after the correction, which added to the illusion that it's a good value.
On the next trading day on Sept 3rd, I actually went ahead and closed this position out. I managed to sell at a price higher than my entry at $243.2201/share, and closed my position in ULTA Beauty Stock.
Now you may be thinking good job, you had a successful swing trade here and although in this situation yes, it worked out, it could have just as easily been closed out at a loss had I sold the stock later in the day because it dropped to below my entry price shortly after. But this is besides the point, because I want to explain now why I made this decision.
I made a hasty decision on ULTA and it's not an industry I understand well enough. ULTA is in the beauty sector - and to add to that, it's a company that operates only in the US currently, so I've never even come across their stores. Not only that, I have absolutely no knowledge when it comes to make up - I don't know what picks up popularity, I don't know what is a good quality brand. I just don't know the industry well enough. After I opened my position on the 30th, I had an uneasy feeling - a feeling I don't have with ANY of my other positions, so it was a bit worrisome, then we went into the long weekend, I found myself thinking about this stock more than I should have, and I came to the decision that this isn't a stock for me. So that's why when the next trading day came around, I sold off my position that morning.
So the investing lesson I learned here, which I want you to learn as well, is that just because a stock seems like a good value, doesn't mean it's the right stock FOR YOU. There are thousands of stocks in the market - some you understand, some you don't, and I think it's important for investors to invest in companies and industries they understand. ULTA is also a fairly small company - under a $14B market cap, so it isn't a massive brand either. The more I looked into this industry, the more I found that competition is high - and IMO, the market is very saturated, so for a company like ULTA to succeed, I couldn't really see what made them stand out from the competition - maybe apart from their salon services, but even so, I wasn't comfortable with a position. This space is also so crowded with social influencers pushing their brands as well, and when it came down to it, I couldn't justify holding a position in ULTA.
Keep this video in mind for next time you're contemplating buying a stock. Ask yourself, do you understand the business? Do you understand the industry? Are the fundamentals strong? and most importantly, are you OK if this stock drops significantly from your entry price? If the answer is a yes, then it may be a good stock for you. If the answer is NO, do more research or simply accept that this may be a stock for you to pass on.
#ULTA #InvestingMistakes #PositiveInvesting
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