Five Beauty Stocks to Buy Despite the Ugliness of War

Paul Dykewicz

Five beauty stocks to buy despite the ugliness of war offer a ray of hope for those who desire a chance to grow their money to avoid succumbing to inflation, a recession and continuing fallout of Russia’s invasion of Ukraine.

The five beauty stocks to buy allow people to invest in companies that traditionally remain important to their customers who seek to maintain appearances when negative circumstances disrupt their lives with disturbing effects. These five beauty stocks to buy serve to give users of those products and services enhanced self-esteem, a chance to present themselves attractively and an escape from the harsh reality of turbulent times. 

“Beauty products are among the consumer staples that tend to do well through recessions and inflation,” said Bob Carlson, a pension fund chairman who also leads the Retirement Watch investment newsletter. “Their customers tend to buy the products except in the worst times.”

To that end, BoA Global Research recently reported that beauty and personal care grew 7% year over year (y/y) in 2021. As consumers exited the pandemic, the beauty and personal care category was ready for accelerated growth globally as consumers chose to spend on more high-quality, premium products and had more occasions to use fragrance and makeup, while prioritizing self-care and placing a high value on clean beauty, BofA wrote. 

Five Beauty Stocks to Buy Include Two Targeting Luxury Products

Leading beauty products companies have been giving positive earnings reports and outlooks, while the management of many other companies have shared “pessimistic” forecasts, Carlson counseled. Investors seeking value may want to consider some smaller, niche beauty companies that have had significant stock price declines, despite reporting higher revenues and earnings, he added.

Bob Carlson, head of the Retirement Watch newsletter, meets with Paul Dykewicz.

One such prospect is Olaplex Holdings (NASDAQ: OLPX), which sells high-priced beauty products. The science-backed premium hair care company offers products that structurally repair and protect hair. 

Founded in 2014, Olaplex Holdings is an innovative company that has a long-term goal of extending the application of its proprietary and patented Bis-amino formula into nail and skin care. OLPX sells through three channels: professional and salon network; specialty beauty retailers, such as Sephora; and direct-to-consumer market channels that include its own website as well as Amazon (NASDAQ: AMZN).

Olaplex sells 11 formulations, all of which contain the patented bis-amino formula, BofA reported. The company’s products protect and rebuild broken disulfide bonds in the keratin fibers of hair damaged by natural and chemical wear and tear, unlike traditional shampoos and conditioners.

Olaplex’s products all contain the company’s patented bis-amino formulation. Its “robust topline growth” benefits from multiple levers beyond the near-term, supported by impressive consumer engagement and response, according to BofA.

Chart courtesy of www.stockcharts.com

Five Beauty Stocks to Buy Feature Facial Product Company

Another stock to consider is Long Beach, California-based Beauty Health (NASDAQ: SKIN), which also sells high-end products and has not reported a slowdown.

The long-term outlook laid out at the investor and long-term guidance of doubling revenues and tripling profits by 2025 should be “achievable and beatable,” wrote Margaret Kaczor, CFA, an analyst with Chicago-based investment firm William Blair. “We see a growing number of opportunities ahead of the company to help drive sustainable growth.”

They include Beauty Health’s recent launch of a digitally connected device to usher in a HydraFacial Syndeo launch in the United States to enhance the consumer and provider experience. Another opportunity is a new JLo Beauty partnership in the fourth quarter.

Chart courtesy of www.stockcharts.com

Additional Ways to Invest in the Bounty of Beauty

There also are marketing initiatives, William Blair wrote in a recent research note. They should provide “durable growth tails” through 2022 and beyond, the investment firm predicted. The research report indicated Beauty Health management is expected to continue to invest in international expansion, marketing, product development and innovation to help drive consumer and customer awareness.

“We believe that these investments leave Beauty Health well positioned for 2022 and beyond to achieve 20%-plus growth,” Kaczor wrote. “The stock currently trades at 4.3 times our 2023 estimate of $416.8 million. We rate the stock Outperform.”

Beauty products companies can be part of a diversified consumer staples portfolio. The consumer staples companies tend to hold up well in recessions and have pricing power against inflation for many of their products.

A good way to establish a diversified consumer staples portfolio is through an exchange-traded fund (ETF), Carlson counseled. He suggested iShares U.S. Consumer Staples ETF (IYK). 

The ETF’s 52 stocks are led by Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO), PepsiCo (NASDAQ: PEP), CVS Health (NYSE: CVS), and Mondelez International (NASDAQ: MDLZ). About 64% of the fund is in its 10 largest positions.

Chart courtesy of www.stockcharts.com

Procter & Gamble Picked as One of the Five Consumer Staples Stocks to Buy

Jim Woods, the leader of the Intelligence Report investment newsletter, has an Income Multipliers portfolio in that publication that includes Procter & Gamble, a Cincinnati, Ohio-based company with diversified consumer products that include many devoted to beauty, grooming and cleanliness. Plus, Procter & Gamble offers strong cash flow that allows it to provide its shareholders an alluring dividend yield of 2.4% compared to the paltry payouts of many others.

Paul Dykewicz meets with stock picker Jim Woods, who heads the Intelligence Report newsletter, as well as co-leads Fast Money Alert.

In addition, Procter & Gamble has a rising dividend policy. In fact, the company has boosted its dividend annually for the past 66 years.

Procter & Gamble, founded in 1837, features 22 brands that generate at least $1 billion in sales.


Chart courtesy of www.stockcharts.com

Investing Involves Managing Risks

Potential risks to Procter & Gamble include inflation weighing on its profit margins, weakened sales from emerging markets in China and the effects of a strong U.S. dollar, said Michelle Connell, president and owner of Dallas-based Portia Capital Management.

Another risk is that consumers may use private-label and generic products more than those of Procter & Gamble, Connell continued. Even though the stock is down so far this year, it has a potential upside of 19% within the next 12 months, she added.

“I think PG would be good here,” Connell continued, especially due to its “reasonably priced” cosmetics, beauty and grooming products.  

Former portfolio manager Michelle Connell, CEO, Portia Capital Management

Procter & Gamble seems more stable than EL (Estée Lauder) which is down 35% year to date (YTD), along with COTY, down 27% YTD.

“I don’t like being early on stocks when they have disappointed so much,” Connell advised. “It will take a few quarters.”  

Procter & Gamble has a very strong and diversified consumer product portfolio also is trading at a bit of a discount after dropping 14% since the start of 2022. However, Connell projects that PG has an upside of 20%. 

Coty Catches the Wave to Join Five Beauty Stocks to Buy 

New York-based Coty (NYSE: COTY), founded in 1904, has grown into one of the world’s largest beauty companies with a portfolio of brands across fragrance, color cosmetics, skin and body care. The company ended fiscal year 2022 with sales of $5.3 billion.

The company divides itself into two segments, Prestige, producing 62% of its fiscal year 2022 sales, and Consumer Beauty, amassing 38%. Geographically, Americas account for 41% of 2022 sales, while the EMEA region contributes 47% and Asia Pacific chips in 12%. Overall, Coty’s products are sold in roughly 125 countries and territories.

Approximately 53% of COTY’s fiscal year 2022 revenues came from prestige fragrance, of which about 82% flowed from the company’s top six prestige fragrance brands. COTY holds a 25.9% stake in the Wella hair care company. COTY is a “controlled company” under NYSE rules, since JAB Cosmetics and its affiliates own more than 50% of total voting power.

Chart courtesy of www.stockcharts.com

ELF Emerges as One of Five Beauty Stocks to Buy

Oakland, California-based e.l.f. Beauty (NYSE: ELF) has been on the rise and is showing no sign of slowing. In July 2022, the company began a skincare campaign to build consumer awareness for e.l.f. SKIN. 

The plan involved educating consumers that skincare can be effective and affordable. ELF has been selling skincare since 2015 but created e.l.f. SKIN as the fourth brand in its portfolio to differentiate the product line for its customers and provide greater marketing support for the brand. e.l.f. SKIN includes previously existing products, such as cleansing balms, moisturizers, and acne products, which all retail for $25 or less.

e.l.f. Beauty sells professional-quality makeup and skincare products at affordable prices. Its products are vegan, paraben-free, cruelty-free and focused on clean beauty, BofA wrote. Brushes, primers, concealers, brows, and sponges comprise roughly 50% of ELF’s sales, which each attained double-digit-percentage sales growth in fiscal year 2022.

In FY22, ELF delivered $392 million in net sales, with a 19% adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) margin. Among its sales, 92% are in the color cosmetics category and 11% are generated outside of the United States.

Chart courtesy of www.stockcharts.com

U.S. COVID Cases Near 95.4 Million

COVID-19 cases and deaths affect supply and demand for beauty products and many others. Savvy investors monitor COVID-19 outbreaks and lockdowns that can cause supply chain problems. In the wake of China locking down more than 70 cities fully or partially to preserve its zero-tolerance policy of COVID, 27 people were killed and 20 more were injured when a quarantine bus overturned on a mountain road Sunday night, Sept. 20.

U.S. COVID-19 deaths rose for the eighth consecutive week by 3,000 or more, jumping to 1,054,271, as of Sept. 20, according to Johns Hopkins University. Cases in the United States climbed to 95,776,398. America remains the nation with the most COVID-19 deaths and cases.

Worldwide COVID-19 deaths in the last week slowed to 11,841, down slightly from about 12,000 in the prior week, 14,977 for the previous week and more than 33,000 in the week before that one, totaling 6,529,562, as of Sept. 10, according to Johns Hopkins. Global COVID-19 faded to a gain of less than 3.4 million for the second straight week, down from almost 4 million three weeks ago. The new worldwide case total reached 612,943,981.

Roughly 79.3% of the U.S. population, or 263,415,633, have received at least one dose of a COVID-19 vaccine, as of Sept. 14, the CDC reported. Fully vaccinated people total 224,636,858, or 67.7%, of the U.S. population, according to the CDC. The United States also has given at least one COVID-19 booster vaccine to 109.2 million people, up 200,000 in each of the last two weeks, compared to roughly 300,000 for the previous two weeks.

The five beauty stocks to buy look ready to beam brightly. Despite high inflation, recession risk after 0.75% rate hikes by the Fed in June and July, as well as a similar rate expected today, Sept. 21, the five beauty stocks to buy could generate glamorous gains.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, Guru Focus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is great as a gift and is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many othersCall 202-677-4457 for multiple-book pricing.

 

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