Warren Buffett Bets Big on Beauty

There’s been lots of talk in recent weeks that the beauty business is in a bit of a bind. Industry observers say the innovation pipeline has run dry and pundits wonder where the next big beauty breakthrough will occur.

Not everyone agrees, of course; including The Oracle of Omaha, Warren Buffett, who has made billions of dollars by investing on businesses based on not where they’ve been, but where they’re going.

Last month, Buffett’s Berkshire Hathaway conglomerate purchased 690,000 Ulta Beauty shares, which were worth $266 million at the end of June. That shopping spree sent Ulta Beauty’s share price soaring to its biggest one-day gain in two years.

Analysts applauded the move. In a note to investors, Oppenheimer analysts Rupesh Parikh and Erica Eiler wrote:

“We view this development as a vote of confidence for the company’s longer-term prospects and a further validation of Ulta’s significantly discounted valuation,” they wrote. “With shares now trading back towards the high $360s and the potential for a miss and guide-down with ULTA’s Q2 report on 8/29, we would still be positioned to take advantage of dips from here.”

Buying on the dip works out most of the time. Better still is to follow Buffett’s advice, “When others are greedy be fearful; when others are fearful be greedy.”

Over the years, makeup, skincare, haircare and the like have proved to be relatively recession-proof. We’re pretty sure the category will produce beautiful innovations, and profits, in the years to come.