Warren Buffett dumped this stock — now it is surging

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.

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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