In this article we will take a look at the 10 best beauty stocks to invest in.
The cosmetics industry encompasses companies that manufacture, sell, and market beauty products like makeup, shampoos, lotions, fragrances, creams, etc. It is undoubtedly one of the fastest-growing industries in the world, generating over $500 billion in sales in 2020. This has certainly made the cosmetic stocks gain value and grab the attention of investors around the globe.
The dawn of 2020 brought uncertainties in every aspect of life and the cosmetic industry is no exception. According to National Purchase Diary NPD, during the first half of 2020, the sales of makeup products, especially lipsticks, declined by 24% due to the constant use of facemasks. Major cosmetic companies like Coty Inc. (NYSE: COTY) saw their share price decline by 52% in March. Similarly, the stock price of Ulta Beauty, Inc. (NASDAQ: ULTA) also declined by 29% in the initial days of the pandemic. Though these stocks are already back on their feet, Vogue Business predicts that color cosmetic sales are expected to decline at an average rate of 2% this year.
On the other hand, the skincare sector thrived during the pandemic. Instead of going for some chemical-induced effective products, consumers are beginning to prefer to use natural and organic products for their skin. According to a report published by McKinsey & Company, 36% of consumers supported the use of natural products over others. Global skincare sales are expected to hit $181 billion by 2025.
Due to the pandemic-induced lockdown, e-commerce sales also saw growth. In Q1 2021, Ulta Beauty, Inc. (NASDAQ: ULTA) reported an increase of 16% in online orders. The company’s overall sales grew by over 65% in Q1, making it one of the best beauty stocks to invest in.
According to a report by Allied Market Research, the global cosmetic company is expected to reach $463.5 billion by 2027, growing at a CAGR of 5.3%. These changing trends and boost in sales have definitely given increased the value of beauty companies, leaving a ton of opportunities for investors. Some major beauty giants like Inter Parfums, Inc. (NASDAQ: IPAR), Revlon, Inc. (NYSE: REV), and e.l.f. Beauty, Inc. (NYSE: ELF) are becoming the choices of investors due to their strong stock performance. Inter Parfums, Inc. (NASDAQ: IPAR) has shown consistent performance in the past, with the stock price soaring over 157% in the last five years. Similarly, e.l.f. Beauty, Inc. (NYSE: ELF) also saw a 21% growth in its net sales.
But investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
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With this context, and industry outlook in mind, let’s now discuss the 10 best beauty stocks to invest in. We took into account hedge fund sentiment, analysts’ estimates, fundamentals and growth catalysts while choosing these stocks. We ranked these stocks based on the number of hedge funds having stakes in them as of the end of the first quarter.
Best Beauty Stocks to Invest In
10. Natura &Co Holding S.A. (NYSE: NTCO)
Market Capitalization: $15.9 billion
Number of Hedge Fund Holders: 4
Natura &Co Holding S.A. (NYSE: NTCO) is Brazil-based personal care and cosmetic company with operations in over 73 countries. It is the parent company of some of the most famous beauty brands such as The Body Shop, Avon, Aesop, and Natura. Natura &Co Holding S.A. (NYSE: NTCO) ranks fifth on our list of the best beauty stocks to invest in.
In Q1 2021, Natura &Co Holding S.A. (NYSE: NTCO) generated 9.5 billion BRL in revenues, up 25% year-over-year from 7.5 billion BRL during the same period last year. The company also reported strong online sales, stating a growth of 166%. The Body Shop accounted for 51% of the total revenue, with digital sales growing by 119%. The NTCO stock has shown a smooth performance after hitting an all-time low of $8.7 in April 2020. Natura &Co Holding S.A. (NYSE: NTCO) stock has gained over 48.4% in the past year.
At the end of Q1 2021, 4 hedge funds, tracked in our database hold positions in Natura &Co Holding S.A. (NYSE: NTCO), worth $61.2 million.
Like The Estée Lauder Companies Inc. (NYSE: EL), Ulta Beauty, Inc. (NASDAQ: ULTA), Coty Inc. (NYSE: COTY), e.l.f. Beauty, Inc. (NYSE: ELF), Unilever PLC (NYSE: UL) and Nu Skin Enterprises, Inc. (NYSE: NUS), Natura &Co Holding S.A. (NYSE: NTCO) is one of the best beauty stocks to invest in.
9. Inter Parfums, Inc. (NASDAQ: IPAR)
Market Capitalization: $2.33 billion
Number of Hedge Fund Holders: 9
Inter Parfums, Inc. (NASDAQ: IPAR) is a New York-based perfume company that manufactures, sells, and markets fragrances. The company has been operational for the past 30 years. Inter Parfums, Inc. (NASDAQ: IPAR) owns some popular perfume companies, including Jean Philippe Fragrances, IP Beauty, and Interstellar Brands.
In Q1 2021, Inter Parfums, Inc. (NASDAQ: IPAR) generated over $198 million in revenue, up 37% at $144.8 million during the same period last year. The EPS stood at $0.87, beating the market estimate of $0.53. In the past year, IPAR stock has gained by 65.3%, and year-to-date growth was 24.5%.
Earlier in June, Inter Parfums, Inc. (NASDAQ: IPAR) announced its engagement with Italy-based luxury goods company, Salvatore Ferragamo, to become the global licensee for the Ferragamo perfumes. This would certainly increase the fragrance sales, which saw a decline during Covid-19 restrictions. At the end of Q1 2021, 9 hedge funds tracked by Insider Monkey hold positions in Inter Parfums, Inc. (NASDAQ: IPAR).
Like Nu Skin Enterprises, Inc. (NYSE: NUS), Coty Inc. (NYSE: COTY), and Ulta Beauty, Inc. (NASDAQ: ULTA), Inter Parfums, Inc. (NASDAQ: IPAR) is one of the best beauty stocks to invest in.
8. Nu Skin Enterprises, Inc. (NYSE: NUS)
Market Capitalization: $2.8 billion
Number of Hedge Fund Holders: 19
Nu Skin Enterprises, Inc. (NYSE: NUS) is seventh on our list of the best beauty stocks to invest in. It is a Utah-based company that manufactures, sells, and markets beauty products and beauty and self-care tools. The company started its foreign operations from Canada in 1990 and currently operates in over 50 countries. The famous subsidiaries of Nu Skin Enterprises, Inc. (NYSE: NUS) include Pharmanex LLC, Groviv, Big Planet, etc.
In Q1 2021, Nu Skin Enterprises, Inc. (NYSE: NUS) showed a 31% year-over-year growth in revenue at $577 million. American and the Asia Pacific accounted for 22% of the revenue. The EPS stood at $0.91, beating the market estimate of $0.72. The NUS stock gained 55.9% in the past year. The company has also announced a quarterly dividend of $0.38 per share and has paid $19.3 million in dividends in Q1.
As of Q1 2021, 19 hedge funds tracked by Insider Monkey have positions in Nu Skin Enterprises, Inc. (NYSE: NUS), worth $327 million.
Like The Estée Lauder Companies Inc. (NYSE: EL), Ulta Beauty, Inc. (NASDAQ: ULTA), Coty Inc. (NYSE: COTY), e.l.f. Beauty, Inc. (NYSE: ELF), Unilever PLC (NYSE: UL) and Natura &Co Holding S.A. (NYSE: NTCO), Nu Skin Enterprises, Inc. (NYSE: NUS) is one of the best beauty stocks to invest in.
7. e.l.f. Beauty, Inc. (NYSE: ELF)
Market Capitalization: $1.4 billion
Number of Hedge Fund Holders: 21
e.l.f. Beauty, Inc. (NYSE: ELF) is a multinational makeup brand dealing with skincare and makeup products. The company also manufactures makeup tools, including kits and cruelty-free makeup brushes. It is based in California, United States.
e.l.f. Beauty, Inc. (NYSE: ELF) released its Q4 FY21 earnings earlier in May 2021 and reported a 21% growth in net sales. The revenue for the quarter stood at $92 million, up from $74.7 million during the same period last year. The company recorded a net income of $36.8 million and shows a brighter outlook for 2021 as the sales are expected to reach $343 million to $350 million. The ELF has stock has gained over 60% in the past year. Moreover, DA Davidson has raised the price target on ELF stock to $35, rating it as a ‘Buy’.
Recently, e.l.f. Beauty, Inc. (NYSE: ELF) announced its first NFTs collection, which will feature three of the brand’s most famous products, dipped in gold, which will be sold via the Bitski platform.
Like The Estée Lauder Companies Inc. (NYSE: EL), Ulta Beauty, Inc. (NASDAQ: ULTA), Coty Inc. (NYSE: COTY), Unilever PLC (NYSE: UL), Natura &Co Holding S.A. (NYSE: NTCO), and Nu Skin Enterprises, Inc. (NYSE: NUS), e.l.f. Beauty, Inc. (NYSE: ELF) is one of the best beauty stocks to invest in.
6. Revlon, Inc. (NYSE: REV)
Market Capitalization: $761,000,000
Number of Hedge Fund Holders: 33
Revlon, Inc. (NYSE: REV) is one of the most famous cosmetic brands in America, mainly dealing in makeup and skincare products as well as fragrances. The company owns some really famous names in the beauty world, including Elizabeth Arden Inc, Charles Revson Inc, Almay Inc, etc.
In Q1 2021, Revlon, Inc. (NYSE: REV) generated $445 million in revenues, down from $453 million during the same period last year. The REV stock has soared by 41.9% in the past year and 26% year to date. The e-commerce sector accounted for 13% of the total revenue and showed 5% year-over-year growth. Sales at Elizabeth Arden grew by 17.9%, compared to the last year, and stood at $112.2 million. The company has launched a Global Growth Accelerator Program to chalk out the reinvestment strategy in order to maintain sustainable growth.
As of Q1 2021, 33 hedge funds tracked in our database have positions in Revlon, Inc. (NYSE: REV), worth $357 million. The number of hedge fund holders remained the same in Q4 2020.
Like The Estée Lauder Companies Inc. (NYSE: EL), Ulta Beauty, Inc. (NASDAQ: ULTA), Coty Inc. (NYSE: COTY), e.l.f. Beauty, Inc. (NYSE: ELF), Unilever PLC (NYSE: UL), Natura &Co Holding S.A. (NYSE: NTCO), and Nu Skin Enterprises, Inc. (NYSE: NUS), Revlon, Inc. (NYSE: REV) is one of the best beauty stocks to invest in.
5. Unilever PLC (NYSE: UL)
Market Capitalization: $155 billion
Number of Hedge Fund Holders: 20
Unilever PLC (NYSE: UL) is fourth on our list of the best beauty stocks to invest in. It is a London-based consumer goods company, dealing in products related to food, home care, and beauty. The company has over 400 brands with operations in 190 countries worldwide. Unilever PLC (NYSE: UL) is the parent company of Ben & Jerry’s, Dermalogica, Volition Beauty, Shea Moisture, etc.
In 2020, Unilever PLC (NYSE: UL) generated over 50 billion euros in revenue and has reported a 5.7% growth in sales in Q1 2021. The sales of the skin cleansing products rose by 5% and personal care, especially deodorants saw a growth of 8% in sales. The UL stock price has grown by over 4% in the past year. The company has also announced a quarterly dividend of 0.42 euros per share. Unilever PLC (NYSE: UL) is also making an effort to achieve carbon neutrality by 2039 by shifting toward renewable energy resources, a move supported by the majority of shareholders.
Earlier in April, Unilever PLC (NYSE: UL) announced to acquire the Texas-based lifestyle company, Onnit, to contribute to the health and well-being of the consumers. At the end of Q1 2021, 20 hedge funds, tracked in our database have stakes in Unilever PLC (NYSE: UL), worth $826 million.
Lindsell Train, an investment management firm, released its Q4 2020 investor letter and mentioned Unilever PLC (NYSE: UL) in it. Here is what the firm has to say:
“One of the biggest holdings here includes Unilever. The way consumers have flocked to such brands in 2020, perhaps for reassurance, has been reassuring for the investors.
In Unilever’s most recent quarterly results the company reported its e-commerce revenues were up 76% year-on-year, up to 10% of the total. This does not mean that Unilever is turning into an Internet business, but it does give reassurance that its brands – from Ben & Jerry’s to Domestos – can remain relevant in an increasingly digital world. By the way – have you tried Unilever’s new Marmite-infused peanut butter? It’s divine.”
4. Coty Inc. (NYSE: COTY)
Market Capitalization: $7.2 billion
Number of Hedge Fund Holders: 25
Coty Inc. (NYSE: COTY) is a New York-based beauty company that mainly deals in hair, makeup, skin, and nail products. The company also manufactures and distributes fragrances. Coty Inc. (NYSE: COTY) is the parent company of some widely acclaimed beauty brands, including Wella, Rimmel, Clairol, Covergirl, Philosophy, and the most popular amongst Gen Z, Kylie Cosmetics. It ranks sixth on our list of the best beauty stocks to invest in.
Coty Inc. (NYSE: COTY) generated a revenue of over $1 billion in Q3 FY21. Over 54% of the revenue came from the U.S. and the Asia Pacific, especially China. Earlier in June, Evercore ISI stated that Coty Inc. (NYSE: COTY) has a potential upside of 70% to the company because of Covergirl’s market share growth. Moreover, the COTY stock has shown solid performance, gaining by 120% in the past year and 41% year to date.
At the end of Q1 2021, 25 hedge funds tracked in our database have positions in Coty Inc. (NYSE: COTY), up from 22 in the previous quarter. The total value of these stakes is $262 million.
3. Ulta Beauty, Inc. (NASDAQ: ULTA)
Market Capitalization: $18.9 billion
Number of Hedge Fund Holders: 46
Ulta Beauty, Inc. (NASDAQ: ULTA) is a chain of beauty stores and one of the largest beauty retailers in America. The company deals with beauty products, including skin, hair, fragrances, and also offer salon services to its customers. Ulta Beauty, Inc. (NASDAQ: ULTA) ranks third on our list of the best beauty stocks to invest in.
In Q1 2021, Ulta Beauty, Inc. (NSDAQ: ULTA) generated over $1.9 billion in revenue, up from $1.1 billion during the same period last year. The EPS for the quarter stood at $4.1, beating the market estimate of $1.95. The ULTA stock has also shown solid performance in the past year, after seeing a low of $148 in March 2020. The stock price has gained over 72% in the past year and 22.3% year to date.
Ulta Beauty, Inc. (NASDAQ: ULTA) remained the top choice of JPMorgan in consumer stocks. Earlier in May, the bank raised the price target on ULTA stock to $379, rating it as ‘Overweight’. Of 866 hedge funds tracked by Insider Monkey, 46 funds have positions in Ulta Beauty, Inc. (NASDAQ: ULTA) in Q1 2021, up from 43 in the previous quarter.
2. International Flavors & Fragrances Inc. (NYSE: IFF)
Market Capitalization: $36.9 billion
Number of Hedge Fund Holders: 55
International Flavors & Fragrances Inc. (NYSE: IFF) is an American corporation that manufactures and sells natural ingredients for flavors, scents, and beauty products. The company has operations in over 44 countries. International Flavors & Fragrances Inc. (NYSE: IFF) is the parent company of some of the famous brands, including Frutarom, Tastepoint Inc, Danisco BV, etc.
In Q1 2021, International Flavors & Fragrances Inc. (NYSE: IFF) generated a revenue of over $2.5 billion, up from $1.3 billion during the same period last year, showing 83% growth. The EPS was recorded at $1.60, beating the market estimate of $1.53. In Q1, the personal care and fragrance sector made $426 million and $569 million, respectively. The IFF stock hit its all-time low in April 2020 due to the global market crash but has bounced back, gaining more than 41% year to date.
The Insider Monkey database shows that hedge funds are getting bullish on International Flavors & Fragrances Inc. (NYSE: IFF), as 55 funds have stakes in the company, up from 33 in the previous quarter.
Rhizome Partners, an investment management firm, has released its Q1 2021 investor letter and mentioned International Flavors & Fragrances Inc. (NYSE: IFF) and other stocks. Here is what the firm has to say:
“We are still getting used to the higher multiples that investors will pay for larger market cap and pure play companies such as IFF. We do understand the market’s rationale. IFF’s products account for a small percentage of the customers’ cost while playing critical roles in the products’ performance. With some operating leverage, the company can probably grow FCF at 4-6% a year. This brings the total return close to the long-term return of the S&P 500 index of 10%. Through trial and error, we have come to appreciate how scale, higher market share, route densities, switching costs, and collaborative relationships amongst major industry players can contribute to sustained high returns on invested capital.”
1. The Estée Lauder Companies Inc. (NYSE: EL)
Market Capitalization: $110.7 billion
Number of Hedge Fund Holders: 59
The Estée Lauder Companies Inc. (NYSE: EL) tops our list of the best beauty stocks to invest in. It is an American beauty company that manufactures skincare, haircare, and makeup products. The company also sells and manufactures fragrances and has operations in over 150 countries. The Estée Lauder Companies Inc. (NYSE: EL) is a parent company of some really popular brands, including Clinique, Bobby Brown Cosmetics, and La Mer.
In Q3 FY21, The Estée Lauder Companies Inc. (NYSE: EL) generated a revenue of $3.86 billion, showing a 16% growth year-over-year. The earnings per share for the quarter beat the market estimate of $1.32 and stood at $1.62. The skincare sector accounted for nearly $2.2 billion of the whole revenue and makeup generated sales worth $1.08 billion. The EL stock has gained more than 62% in the past year and 19.8% year to date. UBS Group has listed The Estée Lauder Companies Inc. (NYSE: EL) as a stock with strong pricing power during inflation. The company is also added to JPMorgan’s Analyst Focus List, projecting a profitable year.
Earlier in May, The Estée Lauder Companies Inc. (NYSE: EL) announced an increase in its ownership in DECIEM Beauty Group from 29% to 76%, worth over $1.0 billion. As of Q1 2021, we see that hedge funds are turning bullish on The Estée Lauder Companies Inc. (NYSE: EL) as 59 funds have a stake in the company, compared with 51 in the previous quarter.
Cooper Investments released its Q4 2020 investor letter and mentioned The Estée Lauder Companies Inc. (NYSE: EL) in it. Here is what the investment management firm has to say:
“Estee Lauder was sold because the business is experiencing a very significant share price appreciation in a short period. We bought this great company earlier in 2020, however Value Latencies appear exhausted – to highlight this point Estee Lauder now trades on 45x Free Cash Flow.”
You can also take a peek at 10 Best Consumer Finance Stocks To Buy Now and 10 Best Communication Equipment Stocks To Buy.
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Disclosure. None. 10 Best Beauty Stocks to Invest In is originally published on Insider Monkey.
