Berkshire Hathaway has recently added Ulta Beauty to its portfolio, marking it as a quintessential value investment.

Warren Buffett’s Berkshire Hathaway has recently taken a new position in Ulta Beauty, a move seen as a strategic investment in an undervalued stock. The Omaha-based conglomerate disclosed a $266 million investment in Ulta Beauty in a regulatory filing on Wednesday, which led to an 11% increase in the retailer’s shares the following day. This purchase is perceived as a classic value investment, especially after Ulta’s stock experienced a significant decline this year due to reduced demand and heightened competition. Oppenheimer analyst Rupesh Parikh commented that this investment signals confidence in Ulta’s long-term potential and highlights the stock’s undervaluation.

Before this investment, Ulta’s shares had dropped 32% in 2024, trading at just 12 times forward earnings, according to FactSet. The stock fell 26% in the second quarter alone and continued to decline by another 15% since June, as the company reported weakening demand in the beauty sector. Other retailers like Macy’s and Kohl’s have also been trying to boost sales by focusing more on beauty products. Stephanie Link, chief investment strategist at Hightower Advisors, expressed surprise at Ulta’s low valuation, noting that the company is still growing its revenues by around 20% despite recent setbacks.

Speculation on Wall Street suggests that either Ted Weschler or Todd Combs, who manage significant portions of Berkshire’s equity portfolio and share Buffett’s value investment approach, might have been behind the Ulta purchase. Berkshire Hathaway has a long history of successful investments in consumer-oriented companies, including Coca-Cola, Kraft Heinz, Kroger, and Floor & Decor.