Recent stock purchases of U.S. retailers — from Warren Buffett's Berkshire Hathaway to Bill Ackman's Pershing Square Holdings — mark a contrarian bet on the consumer amid concerns of a wider spending slowdown.
Berkshire, the Omaha-based conglomerate, unveiled a $266 million investment in Ulta Beauty in a regulatory filing last week, while billionaire investor Bill Ackman's hedge fund disclosed a stake worth roughly $229 million in Nike. Both purchases took advantage of this year's sell-off, which slashed stock valuations. Meanwhile, the buying also came at a time when concerns about the American consumer intensified and the outlook for the economy deteriorated.
Consumer sentiment unexpectedly dropped to an eight-month low in July, according to the Consumer Sentiment Index from the University of Michigan. Unemployment ticked up a hair in July, too. Yet, overall, hedge funds recently turned increasingly bullish on consumer stocks.
The cohort of professional investors widened their exposure to the consumer discretionary sector in the second quarter, making consumer stocks their second-most overweight sector, behind technology, according to data from Morgan Stanley. Some crowded trades in the sector among hedge funds included Wendy's , Bath & Body Works , Wayfair and Under Armour , Morgan Stanley said. Value buys Before the disclosure of Berkshire's stake gave the stock a boost, Ulta had tumbled 32% in 2024, trading at just 12 times forward earnings, according to FactSet.
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