- Berkshire Hathaway (NYSE:BRKa) recently released its 13F filing that details portfolio holdings.
- In the 13F, it was reported that the company exited its position in Ulta Beauty entirely.
- Should investors do the same?
Warren Buffett, chairman and CEO of Berkshire Hathaway B (NYSE:BRKb), and his team do not take investment decisions lightly. When Buffett buys a stock or sells shares, it generally makes news, because investors know how rigorous his screens and processes are, and how successful he has been over the years.
When Buffett adds a new position, it is typically a long-term hold. For example, he’s held American Express (NYSE:AXP) since 1991 and Coca-Cola (NYSE:KO) since 1998.
So, when he added a new stake in Ulta Beauty (NASDAQ:ULTA), the beauty store chain, last summer it was a bit of a surprise. But Ulta’s stock price rose significantly, as investors put their faith in the Oracle of Omaha and his team.
Just two quarters later, however, Buffett completely exited his position in Ulta Beauty, as reported in the company’s 13F filing. It is certainly among the fastest he has exited a position in recent years.
It wasn’t a huge position, by Berkshire Hathaway’s standards, that Buffett had in Ulta. In the second quarter, he bought 690,000 shares of the stock for about $266 million.
In the third quarter, he slashed that position by about 90% to about 24,000 shares worth about $9.4 million.
Then in Q4, according to the 13F, Buffett got out of the position in Ulta entirely, selling the remaining shares.
Should Investors Sell, Too?
Ulta stock has not performed well since Berkshire Hathaway bought it, other than that immediate bump it got. Over the past 12 months, it has dropped 31% and it is down 16% year-to-date to $363 per share.
In January, the company announced a leadership change, as Kecia Steelman, the former president and COO, replaced Dave Kimbell as president and CEO. Kimbell had been at the helm for the past 4 years. Perhaps the management change had something to do with the decision, although that is not clear. Berkshire Hathaway is due to release its annual report on February 22, so maybe there will be some commentary by Buffett on the decision.
The thing is, Ulta raised its fourth-quarter outlook after a stronger-than-expected holiday season. It now expects comparable sales to increase modestly and the operating margin to be above the high end of the expected range of 11.6% to 12.4% of sales.
Analysts are bullish, too, as Ulta has a median price target of $477.50 per share, which is about a 30% increase over the current price. It is also a fairly good value with a P/E ratio of 14.
As to whether investors should follow Buffett and dump the stock, they should probably wait until at least Ulta earnings come out on March 13. It may provide some more visibility.
Ultimately, the decision-making process of a team running a multi-billion portfolio is not the same as it is for an individual investor.