In this article, we will take a look at the 14 best beauty stocks to buy now. To see more such companies, go directly to 5 Best Beauty Stocks To Buy Now.
The beauty industry continues to remain resilient despite rising inflation and a challenging macro environment. Analysts believe the strength of the beauty industry stems from the fact that consumers want products that make them look, feel or smell good. While rich customers are spending on high-end beauty brands, there are plenty of options for cash-strapped consumers as well. This is helping companies across a wider spectrum in the industry. For example, California-based e.l.f. Beauty, Inc. (NYSE:ELF), which makes low-cost but trendy makeup products, saw a revenue growth of about 50% in fiscal third quarter. The company also upped its guidance. Elf Beauty’s CEO Tarang Amin said in the company’s latest quarterly earnings call that e.l.f. Beauty, Inc. (NYSE:ELF) was not seeing any pressure on demand due the current recessionary environment. The executive said some product categories are actually facing a growing demand lately. Here’s what he said:
“No, we’ve not seen any slowdown in demand. I know there’s a lot of concerns out there on recessionary environment. What I’d tell you is, historically, mass color cosmetics, mass skin care has fared really well in inflationary environments….but even more importantly, we’ve long been bullish on the category. And this is a category that really did suffer during the pandemic when people were restricted from their normal behavior. So I’ve long felt there’s a lot of pent-up consumer demand for the categories in which we compete, and we very much are seeing that. I mean for the quarter, as we said, overall mass color cosmetics is up 8% in track channels, masking care was up 6% and our growth is even stronger. So we’re seeing an acceleration of consumer demand, not any slowdown and I feel, again, very bullish in terms of how the category shapes up as we continue to go forward.”
The beauty market was posting growth even when other industries were facing a turmoil when inflation and rate hikes started to hammer the financial markets. According to a Wall Street Journal report, sales of mass-market cosmetics jumped by more than 5% in the June quarter of 2022. About two-thirds of the growth came from higher volumes and the other third from pricing, according to Bank of America research.
But it doesn’t mean the beauty industry is totally immune to the latest pricing challenges and changing consumer behaviors. As consumers start to cut back of discretionary spending, many beauty and cosmetics companies are adjusting their guidance to reflect this change. According to a Bloomberg report, which cited data from NielsenIQ, there was a 2.1% drop in sales of face care items in the 12 months to Oct. 1 compared to a year earlier. The same report cited data from McKinsey, which said that one in five consumers in Europe expect to spend less on makeup and skincare products in the coming months.
In this challenging environment, companies that have budget offerings are faring well. Beauty and cosmetic giants are also relying on their low-priced products to offset losses from high-end products. L’Oreal CEO Nicolas Hieronimus said in an earnings call in October 2022 that the company has “Maybelline and L’Oreal Paris for those who can’t afford an expensive mascara.”
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Our Methodology
For this article, we scanned Insider Monkey’s database of 943 hedge funds and their holdings and picked top 14 beauty and cosmetics stocks with the highest number of hedge fund investors.
Best Beauty Stocks To Buy Now
14. Waldencast plc (NASDAQ:WALD)
Number of Hedge Fund Holders: 7
Waldencast plc (NASDAQ:WALD) is a New York-based micro-cap company that makes skin care products. A total of 7 hedge funds tracked by Insider Monkey held stakes in Waldencast plc (NASDAQ:WALD).
In March, Waldencast plc (NASDAQ:WALD) signed a binding letter of intent to buy a 60% stake in an entity of its Southeast Asian distributor.
The last notable analyst call for Waldencast plc (NASDAQ:WALD) came in October 2022, when Jefferies analyst Ashley Helgans started covering the stock with a Buy rating and an $11.5 price target.
13. Grove Collaborative Holdings, Inc. (NYSE:GROV)
Number of Hedge Fund Holders: 13
California-based Grove Collaborative Holdings, Inc. (NYSE:GROV) is an ecommerce retailer sells natural household and personal care beauty products. As of the end of the fourth quarter of 2022, 13 hedge funds tracked by Insider Monkey had stakes in Grove Collaborative Holdings, Inc. (NYSE:GROV). The total worth of these stakes was about $5.8 million.
In March, Grove Collaborative Holdings, Inc. (NYSE:GROV) posted its Q4 results which were better than estimates. GAAP EPS in the quarter came in at -$0.08, beating estimates by $0.01. Revenue in the quarter fell 15.2% year over year to $74 million, surpassing estimates by $4.5 million.
12. European Wax Center, Inc. (NASDAQ:EWCZ)
Number of Hedge Fund Holders: 16
Headquartered in Texas, European Wax Center, Inc. (NASDAQ:EWCZ) is a chain of hair removal salons that offer waxing services. European Wax Center, Inc. (NASDAQ:EWCZ) ranks 12th in our list of the best beauty stocks to buy now.
Earlier in March European Wax Center, Inc. (NASDAQ:EWCZ) posted Q4 results. Revenue in the quarter increased by 18.6% on a YoY basis to total $53.52 million, beating estimates by $2.45 million. Net income in the quarter, however, fell to $2.3 million from $4.4 million recorded in the prior-year quarter.
For fiscal 2023, European Wax Center, Inc. (NASDAQ:EWCZ) expects its revenue to come in the range of $222 million to $229 million, versus the consensus estimate of $223.48 million.
As of the end of the fourth quarter of 2022, 16 hedge funds had stakes in European Wax Center, Inc. (NASDAQ:EWCZ), according to Insider Monkey’s database.
Baron Small Cap Fund made the following comment about European Wax Center, Inc. (NASDAQ:EWCZ) in its Q4 2022 investor letter:
“European Wax Center, Inc. (NASDAQ:EWCZ) is a fast-growing franchisor and operator of out-of-home waxing services. The stock fell after the company reported that same-store-sales growth was slightly below estimates. Management explained that they saw customers slightly increased their average time between visits, which they attribute to a slowing economy. Makes sense, but not a big deal in our eyes. We like the franchise business model, which generates mid-30s EBITDA margins and requires little capital. We think management is terrific and capable of overseeing the growth of units from 950 to over 3,000 in time, especially with the high-quality franchisees the company is attracting. The stock has been a darling since its IPO on excitement over the business model and growth prospects. As it now trades at a more reasonable multiple, we think we can make strong compounding returns from these levels.”
11. Olaplex Holdings, Inc. (NASDAQ:OLPX)
Number of Hedge Fund Holders: 17
Hair care products company Olaplex Holdings, Inc. (NASDAQ:OLPX) has been under pressure this year following a weak Q4 report which also indicated soft demand in 2023. In March, Cowen downgraded Olaplex Holdings, Inc. (NASDAQ:OLPX) to Market Perform from Outperform and also decreased its price target to $4.50 from $10. The firm said in a note that it was “looking for signs of the business rebounding and new products garnering interests.” But it said that the management’s guidance for 2023 was disappointing and “trends got worse.”
Insider Monkey’s database of hedge funds shows that 17 hedge funds had stakes in Olaplex Holdings, Inc. (NASDAQ:OLPX) as of the end of December 2022. This number is expected to decline based on the recent selloff. Some of the biggest hedge fund stakeholders of Olaplex Holdings, Inc. (NASDAQ:OLPX) were Paul Marshall and Ian Wace’s Marshall Wace LLP, Noam Gottesman’s GLG Partners and Cliff Asness’ AQR Capital Management
Polen Capital made the following comment about Olaplex Holdings, Inc. (NASDAQ:OLPX) in its Q4 2022 investor letter:
“Olaplex Holdings, Inc. (NASDAQ:OLPX) is a leader in the professional, luxury hair care and beauty products business. The company is a pioneer in science-based haircare, which is still in its early days compared to other parts of the luxury beauty market, like skincare. The company has built a dominant brand, delivering robust sales growth by leveraging salon relationships, word of mouth, and social media. We believe the business has a long runway of growth ahead driven by expanding distribution networks, deeper penetration amongst existing clients, and introducing new products. Olaplex is also a rare find among 2021 IPOs with strong profits, high free cash flow, impressive returns on capital,
10. Edgewell Personal Care Company (NYSE:EPC)
Number of Hedge Fund Holders: 19
Edgewell Personal Care Company (NYSE:EPC) sells shaving, skincare, feminine care and grooming products.
Earlier this year, Edgewell Personal Care Company (NYSE:EPC) posted its fiscal first quarter results. Adjusted EPS in the quarter came in at $0.31, beating estimates by $0.10. Revenue in the quarter inched up 1.3% year over year to total $469.1 million, beating estimates by $1.2 million.
For the full year, Edgewell Personal Care Company (NYSE:EPC) expects its reported net sales to increase in the range of 2% to 4%. The previous guidance for growth was flat to 2%.
A total of 19 hedge funds tracked by Insider Monkey were bullish on Edgewell Personal Care Company (NYSE:EPC).
9. Unilever PLC (NYSE:UL)
Number of Hedge Fund Holders: 22
Consumer products giant Unilever PLC (NYSE:UL) is behind several famous beauty and cosmetics brands that are sold across the world. Some of these include Sunsilk, Vaseline, Love Beauty & Planet and Dove.
A total of 22 hedge funds tracked by Insider Monkey entered the first quarter of 2022 with stakes in Unilever PLC (NYSE:UL). The net worth of the stakes of these hedge funds was $776 million. The most significant shareholder of Unilever PLC (NYSE:UL) was Tom Russo’s Gardner Russo & Gardner which had a $275 million stake in the company.
In February, Unilever PLC (NYSE:UL) increased its quarterly dividend by 8.6%. The new dividend was payable on March 21 to shareholders of record as of February 24.
Here is what Polen Capital specifically said about Unilever PLC (NYSE:UL) in its Q2 2022 investor letter:
“Multinational consumer goods company Unilever PLC (NYSE:UL) showed robust price increases overall, with minimal impact on volume, resulting in faster-than-expected sales growth during the quarter. Indeed, higher inflation can be a positive change for companies with favorable brands like Unilever as these conditions make it easier for the biggest brands to raise prices, continue spending on advertising, and take share. We believe the appointment of an activist investor to Unilever’s board in June will help spur additional growth.”
8. The Beauty Health Company (NASDAQ:SKIN)
Number of Hedge Fund Holders: 24
The Beauty Health Company (NASDAQ:SKIN) is known for its flagship skincare product called HydraFacial. The Beauty Health Company (NASDAQ:SKIN) ranks 8th in our list of the best beauty stocks to buy according to hedge funds. As of the end of the fourth quarter of 2022, 24 hedge funds had stakes in The Beauty Health Company (NASDAQ:SKIN). The biggest stakeholder of The Beauty Health Company (NASDAQ:SKIN) was Richard Mashaal’s Rima Senvest Management which owns a $42 million stake in the company.
In February, The Beauty Health Company (NASDAQ:SKIN) posted better-than-expected Q4 results. GAAP EPS in the period came in at $0.03, beating estimates by $0.02. Revenue in the quarter increased by 26% year over year to total $98.13 million, beating estimates by $3.23 million. For 2023, The Beauty Health Company (NASDAQ:SKIN) expects net sales in the range of $450 million to $470 million, versus the consensus estimate of $438.84 million.
7. Coty Inc. (NYSE:COTY)
Number of Hedge Fund Holders: 26
Beauty company Coty Inc. (NYSE:COTY) received bullish comments from Deutsche Bank in March. The firm said Coty Inc. (NYSE:COTY) is one of the consumer stocks that remain undervalued and can see upside in 2023.
As of the end of the fourth quarter, 26 hedge funds tracked by Insider Monkey had stakes in Coty Inc. (NYSE:COTY).
Meridian Hedged Equity Fund made the following comment about Coty Inc. (NYSE:COTY) in its Q4 2022 investor letter:
“A leading global manufacturer and distributor of cosmetics, fragrances, and other beauty care goods, Coty Inc. (NYSE:COTY) advanced as steady consumer demand helped it post greater-than-expected quarterly revenues and improved gross margins. More broadly, the company is building momentum around a hi business transformation that’s in the early innings but has already seen success in e-commerce and direct-to-consumer gains, as well as a rising presence in China. It’s also sharpening its focus on its leading brands as evidenced by its December announcement that it was selling its Lacoste fragrance license back to Lacoste. Coty, which separately announced an expansion of its existing stock buyback program, said it will use the Lacoste deal proceeds to reduce its leverage.”
6. e.l.f. Beauty, Inc. (NYSE:ELF)
Number of Hedge Fund Holders: 29
Cosmetics and skincare products company e.l.f. Beauty, Inc. (NYSE:ELF) is one of the best beauty stocks to buy according to hedge funds. Over the past one year e.l.f. Beauty, Inc. (NYSE:ELF) has gained about a whopping 200%, a remarkable feat especially in the current macroeconomic backdrop.
In February, e.l.f. Beauty, Inc. (NYSE:ELF) posted solid fiscal Q3 results. Adjusted EPS in the quarter came in at $0.48, beating estimates by $0.25. Revenue in the period jumped about 50% year over year to reach $146.5 million, beating estimates by $24.28 million. Gross margin increased about 180 basis points to 67%.
As of the end of the December quarter, 29 hedge funds tracked by Insider Monkey reported owning stakes in e.l.f. Beauty, Inc. (NYSE:ELF). The biggest stakeholder of e.l.f. Beauty, Inc. (NYSE:ELF) was Richard Driehaus’ Driehaus Capital which had a $73.1 million stake in the company.
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Disclosure: None. 14 Best Beauty Stocks To Buy Now is originally published on Insider Monkey.