These household beauty, sports and fashion brands could deliver strong investment results in 2021.
When we think of investing, most of us think about Silicon Valley and their shiny new offices. Or maybe banks as we know them.
But besides the gigantic tech and finance sectors, another sector you should pay attention to is the fashion and beauty industry.
Why beauty stocks are booming
In a word, millennials. Apparently, the habit of following, liking and sharing make-up tutorials and reviews on Instagram and Twitter is allowing newer but less established labels to compete with the traditional big players.
Thanks to social media, beauty companies are seeing an increased ability to reach and engage with their core customers at unprecedented levels.
As a result, 2019 saw leading beauty stocks make double-digit gains. And according to at least one investment bank, this trend is likely to continue, boosting beauty and luxury stocks as a cooped up world gets ready to ‘go out’ once pandemic restrictions ease.
Why fashion stocks are booming
You’d think that with reduced chances to go out, fashion buys would correspondingly go on a decline. Well, not so; while brick and mortar stores remain closed in some regions, and those that remain open continue to endure low footfall, online shopping rates have picked up.
For 2020, Alibaba’s Singles Day Sale (this time, a two-week event) racked up USD74.1 billion worth of transactions, shattering previous records. Similarly, Black Friday 2020 in the US raked in USD14.31 billion in online sales, up 19% over 2019.
Clearly, COVID-19 may keep us indoors, but that’s not stopping us shopping for our favourite fashion brands.
Just by dealing in mass market consumer items and everyday essentials, the fashion sector is a USD 1.65 trillion industry, while the beauty sector is worth around USD 532 billion. With so much money flowing around, you can bet there are gems to be found.
Here are eight beauty and fashion stocks pipped to deliver outstanding results performance* in 2021 and beyond.
*Disclaimer: While all care has been taken to ensure accuracy of information, opinions expressed in this article should not be taken as investment advice. Always consult a licensed professional before buying any stocks or shares. Last updated on 25 January 2021.
Beauty stocks to watch
#1 Coty Inc (COTY)
Global beauty leader and home to some of the most popular cosmetic, skincare and fragrance brands (think Cover Girl, Boss, Calvin Klein and Gucci), Coty was one of the big winners in 2019 – achieving a 70% gain in share price in Feb that year.
While share prices fell in 2020 due to COVID-19, the stock looks set to bounce back in 2021. Already, the company has achieved an earnings-per-share (EPS) growth of 249% year-on-year, quickly putting it on the watchlist of many investment houses.
#2 The Estée Lauder Companies Inc (EL)
Owner of some of the largest skincare and cosmetics brands like La Mer, MAC, Aveda, Clinique and Jo Malone London, Estée Lauder Companies held steady throughout 2020 to emerge with an EPS decline of just 11.8%.
This admirable performance makes it one of the top stocks in the sector with the least profit decline, and certainly one to watch.
Another reason to keep tabs on this one is its momentum; the stock registered a 12-month trailing total return of 25%, making it one of the cosmetic stocks offering the highest total returns over the last 12 chaotic months.
#3 e.l.f. Beauty Inc (ELF)
Many cosmetics brands claim to provide quality cosmetics at affordable prices, but few get it right the way e.l.f Beauty Inc does.
The cosmetics, skincare and bath products purveyor got its start when founders Joseph Shamah and Scott Vincent Borba observed how women driving expensive cars still bought their cosmetics from dollar stores.
Today, the thriving brand enjoys a global presence spanning 18 countries, and has built a reputation for excellent products at budget-friendly prices. It has recently signed a partnership with a popular female gamer Loserfruit (Kathleen Belsten), with a following of over 8 million worldwide.
The company’s strategies are clearly working – it reports a 12-month trailing total return of 45.9% this month.
#4 Kao Corporation (KAOOY)
Cosmetics, skincare, health and home care titan, Kao is the owner of many enduring everyday brands. There’s a good chance you have a tube of Bioré cleanser in your bathroom, clean your home with Magiclean, or make up your face with Kanebo cosmetics.
This Japan-headquartered company makes our list for its 12-month trailing P/E ratio of 29.7. With one of the lowest P/E ratios, investors holding this stock pay less for each dollar of profit generated, compared to other cosmetics stocks.
Fashion stocks to watch
#1 Nike Inc (NKE)
2020’s tumultuous market conditions gave investors little reason to cheer. But Nike’s continued strong performance helped lift the gloom somewhat.
In December 2020, the sportswear giant reported a healthy 9% increase in revenue year-on-year for the quarter ending 30 November, partly fuelled by strong demand from Chinese buyers. Another bright spot was how its online sales saw triple-digit growth back home in America.
On the back of such solid performance during a time when so many others are floundering, multiple investment analysts have put forth strong buy, and hold recommendations on the stock. So, if you’ve been wondering whether you should invest, well, just do it.
#2 Skechers USA (SKX)
American casual footwear clothing retailer is set for a takeoff in 2021, on the back of a strong 2020 performance that saw about 60% of its revenue coming from overseas markets, signalling that the company has sorted out the problems previously plaguing its global expansion efforts.
More reasons to keep your eye on this stock include the impressive gross margin of 64.5% for global direct-to-consumer sales, as well as the consensus Buy rating it received for the year.
#3 Tapestry Inc (TPR)
Posting an eye-popping EPS growth of 1,090% year-on-year, New York-based modern luxury house Tapestry has emerged as one of the fastest growing fashion retailers of 2021. So if you’re looking to boost your portfolio with some high-growth stock, be sure to grab this one.
The company owns just three brands – Kate Spade, Coach and Stuart Weitzman – but has already achieved a market capitalisation of USD 9.3 billion, proving that its quality, not quantity, that counts.
#4 Crocs (CROX)
Remember those abominable rubber shoes that have inspired countless worldwide warnings not to jam your foot into the sides of the escalator (come on people, that’s common sense)? Well, it turns out they’re making a comeback.
And an unexpectedly robust one at that. The company’s share prices have spiked 370% over the last five years. (For context, the S&P 500 only managed growth of 70% in the same period.) Most recently, in November, the stock recorded a 24% rise year-to-date.
Other signs the croc is alive and thrashing: a projected 15% revenue growth this year and a partnership with Justin Bieber launching later this year.
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By Alevin Chan
An ex-Financial Planner with a curiosity about what makes people tick, Alevin’s mission is to help readers understand the psychology of money. He’s also on an ongoing quest to optimise happiness and enjoyment in his life.