B. Riley Asset Management Acquires Rights to Manage Dialectic Hedge Funds
- Press Release
—Ellen Byron, Wall Street Journal
After skimping during the recession, women started buying more high-end cosmetics and fragrances last year, giving makers of upscale beauty products some big returns.
For Linda Bolton Weiser, [...] well-placed bets on a few turnaround efforts by such companies helped her land the No. 1 spot in the household and personal-products sector.
Investors who heeded the 45-year-old analyst's yearlong buy call on Estée Lauder Cos. saw a 68% return. The beauty company, which makes brands including Clinique and La Mer, has been gaining from a turnaround led by Chief Executive Fabrizio Freda, who took the helm in 2009.
"It's a great multiyear turnaround story with a new CEO in place from outside the company," Ms. Weiser says. "In my many years of following this sector, those are typically good stock ideas."
Estée Lauder's overhaul plan included giving managers incentives for profit gains, not just sales growth. And while the strategy initially centered on cost cutting, it soon expanded profit margins as the company focused on its highest-margin products in its fastest-growing regions. "That made the story more powerful and more positive as time went on," Ms. Weiser says.
Ms. Weiser also was encouraged by reports from Hermés International, LVMH Moët Hennessy Louis Vuitton SA and Tiffany & Co. International passenger travel levels and corresponding travel retail figures were also increasing, boding well for cosmetics sales in airport shops.
Those trends also led Ms. Weiser to a buy rating on fragrance company Inter Parfums Inc., which returned 57% last year. Inter Parfums, which makes fragrances for fashion brands Burberry, Lanvin and Jimmy Choo, saw its share price get beaten down during the recession as shoppers skipped new scents and retailers shrank inventories. Spotting what she considered a cheap valuation, Ms. Weiser placed a buy rating on the stock in late 2009 and maintained the call through 2010 as retailers began restocking shelves and shoppers returned.
Frequent store checks help her research. "I'm armed with ammunition about how a new product appears to be doing, the pricing and some promotional activity," Ms. Weiser says. "That allows me to go back to the companies and get them to give me better information or explanation."
To stay on top of Avon Products Inc., she serves as a sales representative. To stay within the bounds of her firm's compliance rules, she sells products only to herself, which helps her stay current on the company's latest cosmetics as well as any logistical problems or product shortages.
But her familiarity with the company didn't exactly pay off last year. Ms. Weiser maintained a buy call on Avon for nearly 11 months as the stock rose just 0.5%. She shifted to a hold rating in late October through the end of the year, and the stock fell 5.6%.
This year, Ms. Weiser's favorite picks still include Estée Lauder, which she predicts will continue to gain from its turnaround. Overall, she is more bullish on makers of discretionary products than household staples like those made by Procter & Gamble Co. or Colgate-Palmolive Co., which face commodity-cost pressures and intense competition.