TCW Funds, an investment management company, released its “TCW Relative Value Large Cap Fund” Q3 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, U.S. and European indices reached all-time highs, fueled by optimism surrounding central bank easing, decreasing inflation, rising hopes for a soft landing, and stimulus measures in China. In the third quarter, all sectors of the Russell 1000 Value posted gains, except for energy. The portfolio’s top ten average-weighted names returned 12.9%, on average, better than the portfolio and benchmark index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.
TCW Relative Value Large Cap Fund highlighted stocks like Coty Inc. (NYSE:COTY), in the third quarter 2024 investor letter. Coty Inc. (NYSE:COTY) is a beauty company engages in the manufacturing, marketing, and distribution of beauty products. The one-month return of Coty Inc. (NYSE:COTY) was -10.06%, and its shares lost 41.77% of their value over the last 52 weeks. On January 3, 2025, Coty Inc. (NYSE:COTY) stock closed at $6.81 per share with a market capitalization of $5.92 billion.
TCW Relative Value Large Cap Fund stated the following regarding Coty Inc. (NYSE:COTY) in its Q3 2024 investor letter:
“Coty Inc. (NYSE:COTY), headquartered in New York, NY, is one of the largest beauty companies with an iconic portfolio of brands across fragrance, color cosmetics, and skin and body care. Brands include CoverGirl, Rimmel, Gucci, Chloe, and Burberry. COTY’s products are sold in over 150 countries around the world and its brands are committed to a range of social causes as well as seeking to minimize its impact on the environment. At exit, the stock had a $8.1 billion market capitalization and met four valuation factors, all except dividend yield. Catalysts were new management, new products, and restructuring. COTY struggled to absorb its acquisition of CoverGirl and other brands acquired from Proctor & Gamble† in 2016. After product missteps and several executive changes, Sue Youcef Nabi, ex-CEO of L’Oreal and Lancome and creator of Orveda, was appointed as CEO of COTY in September 2020. Ms. Nabi has a track record of reviving luxury and mass-market brands through product development, brand repositioning, and innovative marketing throughout her 20-year career at L’Oréal. In November 2020, the company sold a 60% majority stake in its Professional and Retail Hair business to Kolberg Kravis Roberts & Co. (KKR; 1.23%**) for net proceeds of $2.4 billion. The sale of a majority interest in this business simplified COTY’s portfolio and allows it to focus on its core Prestige and Mass Beauty businesses. KKR also made a $1 billion investment in COTY via convertible preferred shares and named two directors to COTY’s board. Under this new leadership team, COTY is now focused on executing on a $800 million fixed cost reduction program between 2021 and 2025 and outlined initiatives to accelerate revenue growth via the premiumization of its portfolio. Initiatives under the plan include the stabilization of Mass Beauty fragrances and make-up, acceleration of Luxury fragrances and Prestige make-up, building a skincare portfolio in Prestige and Mass, enhancing e-commerce capabilities, and expanding in China through its Prestige and Consumer Beauty brands. Despite strong execution and improved financial metrics, macro impacts of a pressured consumer have increased. The deteriorating market sentiment on the beauty industry is a new overhang on the COTY stock and company leverage of 3.9x (down from 6.4x under Ms. Nabi) remains above its peers’. Therefore, we decided to exit the position.”
A close-up of a woman’s face wearing a beauty product, highlighting the company’s range of luxury items.
Coty Inc. (NYSE:COTY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held Coty Inc. (NYSE:COTY) at the end of the third quarter which was 23 in the previous quarter. While we acknowledge the potential of Coty Inc. (NYSE:COTY) 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 timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Coty Inc. (NYSE:COTY) and shared the list of top luxury stocks according to hedge funds. In addition, please check out our hedge fund investor letters Q3 2024 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.