We recently published a list of Warren Buffett’s 10 New Stock Picks. In this article, we are going to take a look at where Ulta Beauty Inc (NASDAQ:ULTA) stands against other Warren Buffett’s new stock picks.
Warren Buffett is one of the few investors that do not require an introduction as his success, wealth and philanthropy are widely known and admired. Earlier this year, Buffett made it clear that his fortune, estimated at around $140 billion will go into a charitable trust that will be administered by his three children. Moreover, the trust will only be able to disburse funds upon unanimous agreement from all three children. In a recently-released letter to shareholders, Buffett explained:
“That restriction enables an immediate and final reply to grant-seekers: “It’s not something that would ever receive my brother’s consent.” And that answer will improve the lives of my children.”
However, in the meantime, Buffett still appears to be at the helm and running the operations at Berkshire Hathaway Inc (NYSE:BRK.A), even though he has handed over most of the day-to-day managing duties to his lieutenants. In the latest financial report, it was revealed that Berkshire has amassed a huge position in cash, cash equivalents and short-term investments in US Treasuries. The cash pile, which stands at $277 billion, is the largest that the holding company has ever had. Moreover, Berkshire has slowed down its stock buybacks and hasn’t bought any of its own shares in the third quarter.
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This has prompted many to speculate that Buffett sees the market as over-valued and is likely anticipating a downturn. In this way, gathering cash will allow Berkshire to purchase shares at cheaper prices. Another explanation might come from Buffett’s comments made at the annual meeting of Berkshire shareholders, where he said that he expected that capital gain taxes to go up, so realizing profits now might be way to save money later.
Nevertheless, Berkshire still maintains a portfolio of 40 stocks. Many of the companies that the fund owns are long-term holdings and you can take a look at some of them in our analysis of Warren Buffett’s 10 longest-held stocks.
Our Methodology
In-line with Buffett’s legacy, Berkshire holds a diversified portfolio and does not make a lot of changes during a quarter. Nevertheless, every quarterly 13F filing reveals two or three new positions acquired during the reporting period. To compile the list of Warren Buffett’s new stock picks, we have scanned through Berkshire’s filings for the last couple of years and have identified 10 stocks that Berkshire has acquired and still holds according to the latest filing.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A photograph of a customer testing out different products in the skincare aisle at a store.
Ulta Beauty Inc (NASDAQ:ULTA)
Shares held by Berkshire Hathaway: 24,203
Stake Acquired: Q2 2024
Also in the second quarter of this year, Berkshire Hathaway added beauty retailer Ulta Beauty Inc (NASDAQ:ULTA) to its portfolio. However, in the following three months, the fund disposed of almost the entire position by selling 665,903 shares.
Berkshire initiated a stake after the stock dipped after the company provided lower than expected guidance for the current year in March and later in April at an investor conference, the company’s management projected that the first quarter results would be at the lower end of the guidance due to slower sales.
For the latest quarter, ended November 2, Ulta Beauty Inc (NASDAQ:ULTA) reported EPS of $5.14 and revenue of $2.53 billion, both topping the expectations by $90.61 and $32.51 million, respectively. Moreover, the retailer inched higher its full-year guidance and now expects between $11.1 billion and $11.2 billion in sales and EPS between $23.20 and $23.75. The company saw a comparable sales growth of 0.6% on the year, which was substantially lower from 4.5% growth seen in the same period of last year. The company has also been investing in expanding its business with 57 new stores opened in the first nine months of its fiscal 2024.
Trading at almost 19 times its forward earnings, Ulta Beauty Inc (NASDAQ:ULTA) is no longer trading at the discount seen earlier this year. Analysts are split between Hold and Buy ratings. For example, following the earnings release, UBS maintained a Buy rating and hiked the price target to $490, while Citigroup raised the price target to $450 and maintained a Neutral rating.
Overall, ULTA ranks 3rd on our list of Warren Buffett’s new stock picks. While we acknowledge the potential of ULTA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ULTA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
