We recently compiled a list of the 7 Best Vegan Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Ulta Beauty Inc. (NASDAQ:ULTA) stands against the other vegan stocks.
Vegan food consists of products that are entirely free of animal ingredients or by-products, including meat, poultry, fish, dairy, eggs, honey, and other animal-derived substances. Veganism is both a dietary and lifestyle choice aimed at avoiding animal exploitation while promoting ethical, environmental, and health benefits. That said, vegan and plant-based products appeal to a much broader audience than just those avoiding meat and animal products. This is especially true for meat substitutes. Pat Brown, founder of Impossible Foods, believes that vegetarians are not the primary audience for these products, which are designed to closely mimic the taste and texture of meat. Instead, meat substitutes are aimed at meat eaters, helping them transition to a plant-based diet more easily by offering familiar flavors and experiences.
Additionally, a study published by the Journal of the American Medical Association (JAMA) found that individuals who follow a vegan diet have a higher life expectancy than those on a meat-based diet. This has led health-conscious consumers to embrace vegan food, positively impacting leading plant-based food stocks. Another study by researchers at Oxford’s Martin School found that a global shift toward diets rich in fruits and vegetables and less reliant on meat could potentially prevent around 8 million deaths by 2050. This dietary transition could also save approximately $1.5 trillion in climate-related costs and reduce greenhouse gas emissions by over 60%. Studies consistently show that Gen Z is particularly interested in plant-based diets, driving companies to develop products tailored to this key demographic. Plant-based diets also offer substantial environmental benefits.
Veganism extends beyond just food—clothing made without animal products also qualifies as vegan fashion. More specifically, vegan fashion often refers to items typically made from plant-based or synthetic alternatives to animal materials. In 2022, the global market for non-animal leather clothing and accessories reached approximately $41 billion, with the United States as the largest market. Footwear is a key segment in this shift, where leather has long been valued for quality in both sneakers and formal shoes. To meet growing demand for animal-free options, brands are innovating. In 2021, Adidas introduced a Stan Smith sneaker made from a mushroom-based leather alternative, and has also collaborated with vegan fashion leader Stella McCartney on other vegan footwear.
Despite rising awareness of animal welfare in fashion, this hadn’t consistently translated into consumer behavior until more recently. A new global YouGov survey reveals that over a quarter (27%) of people now actively avoid animal-based fashion. The poll also shows strong public support for cruelty-free fashion, with 70% of Americans agreeing that fashion companies should reduce their use of animal-derived materials, invest in alternatives, and transition to sustainable, animal-friendly materials.
According to Fortune Business Insights, the global vegan food market was valued at $33.14 billion in 2023 and is expected to grow to $37.37 billion in 2024. By 2032, it is projected to reach $103.00 billion, with a compound annual growth rate (CAGR) of 13.51% over the forecast period. Bloomberg Intelligence further projects that the plant-based food market could account for 7.7% of the global protein market by 2030, with an estimated value exceeding $162 billion. Moreover, meat alternatives are set to capture a significant portion of the plant-based food market through 2030. If this sector mirrors the growth of plant-based milk, Bloomberg Intelligence projects that it could expand from its current $4.2 billion to $74 billion over the next decade.
Our Methodology
We first compiled a list of vegan stocks by sifting through financial media reports. We selected the following vegan stocks based on hedge fund sentiment toward each company. The sentiment data was sourced from Insider Monkey’s database, which tracks 912 elite hedge funds as of the end of Q2 2024. The list is organized in ascending order, based on the number of hedge fund investors in each firm.
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)
Number of Hedge Fund Holders: 46
Ulta Beauty, Inc. (NASDAQ:ULTA) is a leading American chain of beauty and cosmetics stores, offering over 600 brands. Among its featured vegan brands are IGK, IT Brushes, Nailtopia, and Tanology. In 2020, Ulta launched its ‘Conscious Beauty’ program across all stores, online, and via its app. This initiative highlights vegan, cruelty-free, and sustainably packaged products, appealing to eco-conscious consumers.
Despite some challenges in its Q2 FY2024 earnings, Ulta Beauty, Inc. (NASDAQ:ULTA) remains a strong investment choice due to its strategic strengths. The company saw a modest 0.9% increase in net sales, reaching $2.55 billion, demonstrating resilience despite a 1.2% decline in comparable sales in a tough retail landscape.
On October 21, JPMorgan raised its price target for Ulta Beauty, Inc. (NASDAQ:ULTA) to $472 from $450, maintaining an Overweight rating, but noted a cautious outlook for 2025 based on Ulta’s recent Analyst Day presentation. Ulta’s management provided conservative guidance, anticipating that comparable store sales growth may fall below the typical 3-4% range and operating margins could dip under 12%, reaching a minimum of 11%. This suggests flat or potentially declining earnings for 2025, taking into account projected unit growth, comparable sales, margin pressures, and EPS growth through share repurchases. That said, the analysis indicated that consensus for Ulta’s 2025 EPS is aligning around $23, based on an estimated 1% same-store sales increase and an 11.6% operating margin.
Diamond Hill Long-Short Fund stated the following regarding Ulta Beauty, Inc. (NASDAQ:ULTA) in its Q2 2024 investor letter:
“Still-rising valuations have made identifying attractively valued, long ideas increasingly challenging — though we still found a few in Q2 that we believe the market is overlooking amid its increasingly narrow focus on the mega-cap technology stocks dominating the major indices. We established new long positions in VeriSign, Ulta Beauty, Inc. (NASDAQ:ULTA), Sysco Corporation and Lamb Weston Holdings during the quarter.
Ulta is a leading US specialty beauty retailer. As inflation has remained relatively elevated and consumers have found ways to economize and moderate discretionary spending, we believe Ulta is well-positioned to take share given its compelling portfolio of beauty brands across a range of price points, including its own private-label brand. We believe the current share price fails to account for an attractive outlook for the company and capitalized on a low valuation to initiate a position in Q2.”
Overall ULTA ranks 1st on our list of the best vegan stocks to buy according to hedge funds. While we acknowledge the potential of ULTA as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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.
