Anika Begay
Warren Buffett’s Berkshire Hathaway recently debuted a new stake in beauty retailer Ulta Beauty, a deep value bet that validated the belief that the stock was significantly oversold. The Omaha-based conglomerate unveiled a $266 million bet on Ulta Beauty in a regulatory filing Wednesday night, sending shares soaring 11% the next day. Many see the purchase as a classic value buy after shares of the beauty supply chain have suffered a major sell-off this year amid slowing demand and increased competition. “We view this development as a vote of confidence in the company’s long-term prospects and further validation of ULTA’s significantly discounted valuation,” Oppenheimer analyst Rupesh Parikh said in a note. ULTA YTD Ulta Beauty stock mountain in 2024. Before Buffett’s purchase boosted the stock, Ulta had plunged 32% in 2024, trading at just 12 times forward earnings, according to FactSet. After falling 26% in the second quarter alone, the stock has lost another 15% since late June, when the retailer warned of cooling demand in the beauty category. Meanwhile, other retailers, including Macy’s and Kohl’s, have sought to drive sales growth by expanding their focus on beauty products. “I can’t believe how cheap Ulta has become, and this is a company that’s growing revenue in the order of 20% … it’s just had a little stumble,” Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors, said Thursday on Vscek’s “Squawk Box.” “I’ve never been able to own Ulta because it’s always been so expensive, but it’s really gone downhill.” Given Ulta’s relatively small size, there has been widespread speculation on Wall Street that one of Buffett’s lieutenants, Ted Weschler and Todd Combs, was responsible for buying Ulta. The two managers, who share Buffett’s value investing philosophy, each oversee about $15 billion of Berkshire’s stock portfolio, which is now worth well over $300 billion. Berkshire has successfully invested in consumer-focused companies for decades, including longtime holdings like Coca-Cola and Kraft Heinz, as well as more recent purchases like Kroger and Floor & Decor.
