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Is Estée Lauder Companies (EL) a Smart Long-term Buy?

Alex Smith
·3 min read

Polen Capital Management recently released its Q3 2020 Investor Letter, a copy of which you can download here. During the third quarter of 2020, the Polen Global Growth Composite Portfolio returned 9.09% gross of fees, while the MSCI All Country World Index was up 8.14%. You should check out Polen Capital’s top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Polen Capital highlighted a few stocks and Estee Lauder Companies Inc (NYSE:EL) is one of them. Estee Lauder Companies Inc (NYSE:EL) is a makeup company. Year-to-date, Estee Lauder Companies Inc (NYSE:EL) stock gained 12.6% and on October 22nd it had a closing price of $232.62. Here is what Polen Capital said:

"While Estée Lauder also has brick-and-mortar exposure, it has been successfully shifting its business online. In the most recent quarter, online accounted for roughly 40% of sales in both the U.S. and China, with online sales growing swiftly on a large base. Estée Lauder is the global market leader in prestige beauty products, which is a large and growing market. We believe competitive advantages consist of brands and economies of scale, similar in concept and execution to Nike and Adidas. Global cosmetics companies, and Estée Lauder in particular, have been pulling away from the “also-rans” as a result of their scale, global reach, capital, and new omnichannel and social capabilities. Like Nike and Adidas, Estée Lauder successfully executes the flywheel of reinvesting billions of dollars into supporting its brands. Last year, Estée Lauder spent ~$3.5B on advertising and promotion. This equates to ~24% of revenue, which is a hurdle consistently too high for new entrants to clear."

Pixabay/Public Domain

In Q2 2020, the number of bullish hedge fund positions on Estee Lauder Companies Inc (NYSE:EL) stock increased by about 5% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in Estee Lauder's growth potential. Our calculations showed that Estee Lauder Companies Inc (NYSE:EL) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free enewsletter below to receive our stories in your inbox:

Disclosure: None. This article is originally published at Insider Monkey.