We recently compiled a list of the 10 Best Hair Care Stocks To Buy Now. In this article, we are going to take a look at where Kenvue Inc. (NYSE:KVUE) stands against the other hair care stocks.
According to Fortune Business Insights, in 2023, the hair care industry was estimated to be worth $99.52 billion globally. Between 2024 and 2032, the market is projected to expand at a CAGR of 10.4% from $106.91 billion to $213.47 billion. In 2023, Europe held a 36.43% market share, leading the hair care industry.
The demand for hair care products has increased as a result of the growing acceptance of longer hairstyles by males and the growing popularity of hair coloring. According to a survey conducted in 2020 by Garnier, 42% of 2,000 Americans discovered new techniques for dyeing their gray hair. Secondly, an increasing number of consumers are dealing with hair problems such as dandruff, graying hair, and hair loss, which will likely lead to a rise in the use of hairdressing products. According to survey results released in January 2022 by the Dermatology & Cutaneous Surgery Institute (DCSI), over two-thirds of Americans over the age of 35 experience issues with hair thinning and loss. Furthermore, the World Health Organization (WHO) released estimates showing that 30% of Japanese people were over 60 in 2020. Thirdly, there is an increasing emphasis on the development of organic and natural products to meet rising product demand. For example, Australian scalp care brand Straand made its UK debut in November 2023. To create product distinctiveness in the very competitive market, the company concentrates on creating cruelty-free and microbiome-centric products.
Specifically, as we have mentioned in our article, “20 Cheap Alternatives to Aveda Shampoo,” the global luxury hair care market was dominated by the luxury shampoo segment, which held a revenue share of approximately 30.5% in 2023.
According to a Cirana report, sales of hair products in the prestige market rose by 10% YoY in the first half of 2024, based on dollars, with styling and treatments showing the fastest rate of growth within the category. The trend of premiumization is still driving growth; three times as many hair products as lower-priced items have been added in the last three years, and these products now make up 25% of the category’s unit sales, compared with 15% just three years ago. Being the only beauty category where the bulk of sales takes place online, the premium hair market also makes for an intriguing channel tale. In fact, with double-digit growth in sales, the e-commerce channel is not slowing down at all.
One hair care product that is gaining popularity is dry shampoo. As we have stated in our article, “11 Dry Shampoo Alternatives for Every Hair Color and Type,” the dry shampoo market is expected to grow from $5.35 billion in 2023 to a valuation of $9.18 billion in 2030.
As we look ahead, Frost & Sullivan’s report reveals that the hair care market is changing due to disruptive technology like artificial intelligence, customized solutions, and innovative ingredients. The “skinification” movement places a strong emphasis on scalp health, which is driving businesses to use regenerative medicine and useful components like biotin and peptides. Personalized care is improved via IoT-enabled grooming products and AI-powered scalp analysis technologies. Companies are adopting waterless products, recyclable packaging, and a reduction in toxic chemicals as a significant priority in sustainability. Companies that want to satisfy changing customer preferences and lessen their environmental effect must promote scalp health and integrate next-generation technologies. These developments spur expansion and help brands maintain their competitiveness in a market that is changing quickly.
Benoit Butruille, Growth Expert and Principal Consultant, TechVision at Frost & Sullivan, stated:
“Hair and scalp care is booming, and it is of great interest to understand the innovations and strategies driving this growth. Technologies such as AI are being used to develop smart hair care devices. Additionally, sustainable practices are becoming increasingly important as more customers seek products made with ethically sourced, eco-friendly ingredients.”
Methodology:
We sifted through holdings of hair care ETFs and online rankings to form an initial list of 20 hair care stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
Why are we interested in 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 pharmacist at a local store, stocking shelves with products from the consumer health company.
Kenvue Inc. (NYSE:KVUE)
Number of Hedge Fund Investors: 58
Kenvue Inc. (NYSE:KVUE), with $15 billion in revenue annually, is the largest pure-play consumer health company in the world. The business, which was originally Johnson & Johnson’s consumer division, split out and went public in May 2023.
Given its capacity to deploy funds and make investments as a stand-alone company, analysts predict that Kenvue would emphasize growing its 15 priority brands, including its haircare names, such as Johnsons, Neutrogena, Aveeno, OGX, and Rogaine, to fuel future growth.
Its portfolio includes many of the best-known brands in the business, such as Aveeno, Johnson’s, Listerine, Neutrogena, and Tylenol. Due to their exceptional brand strength, several of the company’s brands are the market leaders worldwide in their respective niches, even though they compete in a highly fragmented industry with ever-changing consumer preferences.
Oakmark Fund stated the following regarding Kenvue Inc. (NYSE:KVUE) in its first quarter 2024 investor letter:
“Kenvue Inc. (NYSE:KVUE) became the largest standalone consumer health company following its split-off from Johnson & Johnson in May 2023. The company’s highly recognizable brands, such as Neutrogena, Listerine, Tylenol and Band-Aid, have been market share leaders in their respective categories for generations. However, Kenvue’s first year as a public company was clouded by litigation and market share losses in certain categories. As a result, Kenvue now trades for just 16.5x trailing earnings, a substantial discount to the market and other consumer health and packaged goods companies. We see an opportunity for the company to improve efficiency and re-invest the cost savings into increased product development and marketing, which should help improve its growth and brand equity.”
The firm’s Q2 2024 statistics, which revealed $4.0 billion in revenue and 1.5% organic growth, signaled a turnaround and led to an increase in Kenvue’s stock price. Despite macro headwinds, the company’s high-intangible brands and cost-cutting initiatives are expected to generate persistent momentum.
Morningstar analysts project that the company, like a number of its wide-moat competitors, will invest roughly 3% of sales on R&D in order to launch innovative products.
Natixis Global Asset Management’s Harris Associates is the largest shareholder in the company, with 29,273,397 shares worth $532.19 million.
Overall KVUE ranks 2nd on our list of the best hair care stocks to buy. While we acknowledge the potential of KVUE as an investment, our conviction lies in the belief that some 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 KVUE 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.