Warren Buffett’s Berkshire Hathaway recently disclosed its latest stock purchases in a regulatory filing. The billionaire investor’s company bought shares of aerospace parts supplier Heico and beauty retailer Ulta Beauty in the second quarter. Heico makes replacement parts for commercial aircraft and components for defense products.
Morningstar believes the company has a narrow economic moat due to the complexity of its products, strict regulations, and high switching costs for customers. Heico is expected to grow at a 12.5% annual rate through 2028. However, the stock currently trades well above Morningstar’s fair value estimate of $173 per share.
Ulta is the largest specialized beauty retailer in the U.S. It has a narrow moat based on its strong brand, according to Morningstar. The company is expanding with new stores, e-commerce, and shops inside Target locations. This should attract new customers and increase Ulta’s share of beauty spending.
Buffett’s latest stock additions
Ulta stock trades slightly below Morningstar’s $405 fair value estimate. While Buffett’s purchases are noteworthy, investors should still evaluate if these stocks fit their own portfolios.
“The fact that Warren Buffett bought a stock doesn’t necessarily mean that you should too,” says Morningstar’s Susan Dziubinski. She advises investors to consider their personal risk tolerance, investment goals, and current holdings before following Buffett’s moves. Berkshire also sold some stocks in the second quarter, but the Heico and Ulta purchases stood out as new additions to Buffett’s portfolio.
The legendary investor looks for companies with strong competitive advantages and long-term growth potential. However, even Buffett can pay too much for a stock, as the Heico valuation suggests. Investors can learn from Buffett’s disciplined approach and focus on business fundamentals.
But blindly copying his trades is not a sound strategy. As with any investment, it’s important to do your own research and make decisions based on your specific financial situation.
