As one of the most famous investors of all time, Warren Buffett’s stock market maneuvers are closely tracked by investors hoping to emulate his successes.
The ‘Oracle of Omaha’ is a value investor — he tends to buy equity in businesses that are trading at attractive valuations, and preferably have an economic moat — in simpler terms, an enduring competitive advantage.
Buffett has made mistakes on rare occasions, however — most notably, passing on Google (NASDAQ: GOOGL) and investing in Dexter Shoe in 1993. Throughout the latter half of 2024, he has been notably restrained, or even bearish — Berkshire Hathaway (NYSE: BRK.A) has been a net seller of stocks for the last eight quarters, and Buffett currently maintains a record-breaking cash pile.
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It remains to be seen whether a market correction is in the making and if the ‘Oracle of Omaha’ is right on that account — what’s even more interesting, is that the billionaire could have made another of his seldom-seen mistakes by slashing his stake in a company whose stock is currently surging.
The business in question is Ulta Beauty (NASDAQ: ULTA), a cosmetics retailer. At press time, ULTA stock was trading at $375.25 — although shares are still down 22.88% on a year-to-date basis, they have rallied by 9.36% over the last week.
Did Warren Buffett cut his ULTA stock position too early?
Berkshire Hathaway first invested in the cosmetics company back in Q2 2024 — the exact dates are not known per disclosure rules, but in that span of time, ULTA stock was trading between $439 and $376. The company purchased 690,106 ULTA shares.
Buffett slashed his stake in the company over the course of the following quarter — per Berkshire’s 13-F filings for Q3 2024, only 24,203 ULTA shares were retained, a 96% reduction. Over the course of that quarter, Ulta Beauty stock traded at prices between $412 and $322.
This was a rather early and abrupt exit from Berkshire, whose favorite holding period is ‘forever’. While there is a chance that a profit was made on the sale, it’s slim and would have required precise timing — which is not exactly a hallmark of Buffett’s preferred investment style.
While the business does not possess a meaningful economic moat, its peer, Bath & Body Works (NYSE: BBWI) reported a beat in terms of both earnings and revenue for Q3 2024 — as a result, markets have high expectations for Ulta Beauty’s earnings call, due December 5.
Only time will tell whether or not pulling the trigger on ULTA stock was a mistake — if we see a strong beat on December 5, shares could easily surpass even the highest possible price at which Buffett acquired them.
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