Here’s Why Polen Capital Sold Olaplex Holdings (OLPX)

Polen Capital, an investment management company, released its “Polen U.S. Small Company Growth Strategy” first-quarter investor letter. A copy of the same can be downloaded here. In the first quarter, the fund delivered 10.81% net of fees compared to a 6.07% return for the Russell 2000 Growth Index. At the beginning of the quarter, the market witnessed growing possibilities but later, the collapse of banks and ensuing concerns affected the market.  In addition, please check the fund’s top five holdings to know its best picks in 2023.

Polen U.S. Small Company Growth Strategy highlighted stocks like Olaplex Holdings, Inc. (NASDAQ:OLPX) in the first quarter 2023 investor letter. Headquartered in Santa Barbara, California, Olaplex Holdings, Inc. (NASDAQ:OLPX) is a beauty company, focused on hair care products. On April 27, 2023, Olaplex Holdings, Inc. (NASDAQ:OLPX) stock closed at $3.8200 per share. One-month return of Olaplex Holdings, Inc. (NASDAQ:OLPX) was -10.54%, and its shares lost 74.01% of their value over the last 52 weeks. Olaplex Holdings, Inc. (NASDAQ:OLPX) has a market capitalization of $2.49 billion.

Polen U.S. Small Company made the following comment about Olaplex Holdings, Inc. (NASDAQ:OLPX) in its Q1 2023 investor letter:

“We exited three positions during the quarter: Duck Creek Technologies, Azenta, and Olaplex Holdings, Inc. (NASDAQ:OLPX). We believe Olaplex highlights our willingness to change our mind when information changes, even with a new position. Olaplex is a highly profitable and uniquely positioned prestige beauty brand focused on science-based hair care. When we first invested in Olaplex in the fourth quarter of last year, it was on the back of the stock re-rating lower as revenue growth decelerated from rapid growth to a more sustainable growth rate. We felt this re-rating represented a significant discount on the stock’s long-term potential. In the short time since we became owners, a tail risk emerged related to a claim that the products cause hair loss and damage. At worst, this presents an existential threat to the business and, in the best-case scenario, makes everything that they are trying to do today a lot harder. No longer comfortable with the significantly widened range of potential outcomes, we eliminated the position as we have investment alternatives of equal or better reward today with meaningfully less risk. While it is unusual for us to exit positions so quickly, sometimes this is necessary. Not only is it important to be open to changing one’s mind quickly as new risks emerge—it is essential to protecting and preserving our clients’ capital.”

Photo by Adam Winger on Unsplash

Olaplex Holdings, Inc. (NASDAQ:OLPX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Olaplex Holdings, Inc. (NASDAQ:OLPX) at the end of the fourth quarter which was 18 in the previous quarter.

We discussed Olaplex Holdings, Inc. (NASDAQ:OLPX) in another article and shared the list of best beauty stocks to buy. In addition, please check out our hedge fund investor letters Q1 2023 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.