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.
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.
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.
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)
To invest in makeup stocks, you need a brokerage account. Review platform features and fees to find the account that best fits your needs.
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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.
These two sectors refer to the same thing. Consumer staples are considered defensive because they remain relatively stable in all economic climates.
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Shannon Terrell is a lead writer and spokesperson at NerdWallet and a former editor at Finder, specializing in personal finance. Her writing and analysis on investing and banking has been featured in Bloomberg, Global News, Yahoo Finance, GoBankingRates and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga. See full bio
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Stacie Hurst is an editor at Finder, specializing in a wide range of topics including stock trading, money transfers, loans, banking products, online shopping and streaming. She has a Bachelor of Arts in Psychology and Writing, and she completed one year of law school in the United States before deciding to pursue a career in the publishing industry. When not working, Stacie can usually be found watching K-dramas or playing games with her friends and family. See full bio
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