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Investing in makeup stocks

The industry reports steady profits, but online shopping may threaten legacy brands.

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Interested in adding cosmetics stocks to your portfolio? This consumer staple tends to do well in down markets, but shifting shopping trends may trigger volatility within the industry.

What are makeup stocks?

Makeup stocks are stocks from cosmetics and consumer beauty companies that produce makeup, perfume, skincare products, hair care products and toiletries.

Investing in makeup stocks can be complicated, as most drugstore brands are owned by a parent company. In fact, nearly 200 makeup brands fall under the ownership umbrella of only 8 companies.

For example, Aveda, Clinique and M.A.C.? Those belong to Estée Lauder. And Lancôme and Maybelline? Those are owned by L’Oréal.

There aren’t many cosmetic stocks that trade on Canadian stock exchanges, but there are some that trade on US exchanges. However, investors interested in this subcategory of the consumer staples sector should also prepare to invest in brands outside North America, too, like the Japanese personal care company, Kosé, or German skincare brand, Biofrontera.

Why invest in makeup stocks?

Believe it or not, the beauty and cosmetics industry is considered a consumer staple, which means the products it manufactures tend to be in consistent demand, even in a down market.

With self-care trending on social media and beauty vloggers racking up the views, makeup has become more than a way to enhance our appearance — it’s an artistic medium. And research has discovered that those who use cosmetics aren’t willing to decrease what they spend on beauty products, even with less disposable income on hand.

The cosmetics industry has staying power — makeup has existed for hundreds of years and if recent market trends are anything to judge by, the industry isn’t going anywhere.

The global cosmetics industry is expected to hit USD $429.8 billion by 2022, with a forecasted compound annual growth rate of 4.3% from 2016 to 2022, according to Allied Market Research. And rising trends in natural and cruelty-free ingredients is paving the way for market newcomers — like organic makeup companies — to expand.

This multibillion-dollar global industry continues to grow and may stand as a diversifying stock to balance your portfolio in times of economic downturn.

Risks of investing in makeup

No industry is immune to volatility — even those in the consumer staples sector. The rise of e-commerce and prevalence of social media has begun to convert in-person browsers to online shoppers. And the cosmetics industry is responding.

Smaller, independent names, like e.l.f. and Ulta, are increasingly challenging legacy brands like L’Oréal and Estée Lauder. And with the rising rates of online shopping, older brands that relied on the in-person rep or makeup artist to clinch the sale are scrambling for footing.

Before you invest, review the historical performance of the makeup stock you’re interested in. Is it on an upward trajectory? Leveling out? Losing ground? Newer brands are more of a gamble but may have the agility to outmaneuver the legacy brands.

How to reduce your investment risk

Makeup stocks

To purchase makeup stocks, prepare to invest in Canadian, US and international companies.

  • Apollo Healthcare Corp. (TSX: AHC)
  • MAV Beauty Brands Inc. (OTC Markets, Pink Sheets: MAVBF)
  • e.l.f. Beauty, Inc. (NYSE: ELF)
  • Ulta Beauty, Inc. (NASDAQGS: ULTA)
  • Beiersdorf Aktiengesellschaft (OTC Markets, Pink Sheets: BDRFY)
  • Coty Inc. (NYSE: COTY)
  • LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTC Markets, Pink Sheets: LVMUY)
  • The Estée Lauder Companies Inc. (NYSE: EL)
  • L’Oréal S.A. (OTC Markets, Pink Sheets: LRLCF)
  • Coty Inc. (NYSE: COTY)
  • Johnson & Johnson (NYSE: JNJ)
  • Shiseido Company, Limited (TYO: 4911)
  • Revlon, Inc. (NYSE: REV)
  • KOSÉ Corporation (TYO: 4922)

Compare trading platforms

To invest in makeup stocks, you need a brokerage account. Review platform features and fees to find the account that best fits your needs.

Name Product Available asset types Stock Fee Option Fee Account Fee ETF Transaction Cost
Wealthsimple Trade
Stocks, ETFs
$0
N/A
$0
Free
Get a $25 bonus when you open a Wealthsimple Trade account and deposit and trade at least $100.
Questrade
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, IPOs, Precious Metals
$4.95 - $9.95
$9.95 + $1 per contract
$0
Free
Opt for self-directed investing and save on fees or get a pre-built portfolio and take some of the guesswork out.
Interactive Brokers
Stocks, Bonds, Options, Mutual Funds, ETFs, Currencies, Futures, Precious Metals
Min. $1.00, Max. 0.5% of trade value
$1.50 min. per order
$0 (if monthly commissions are equal to or greater than US$10.00)
Min. $1.00, Max. 0.5% of trade value
Access market data 24 hours a day, six days a week and invest in global stocks, options, futures, currencies, bonds and funds from one single account.
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Bottom line

Makeup stocks may offer portfolio diversification during times of economic downturn. But no industry or investment is risk-free, and emerging shopping trends may trigger competition within the industry.

Review your brokerage account options across multiple platforms to find the account that best meets your needs.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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