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For the Q2 period ending June 30th, 2024, Berkshire Hathaway filed its mandatory Form 13F to the Securities and Exchange Commission (SEC) on Wednesday. Although significantly reduced, Warren Buffett still holds Apple (NASDAQ: AAPL) in high regard, with a 30% stake in the portfolio at 400 million shares worth $84.2 billion.

Bank of America (NYSE: BAC) and American Express (NYSE: AXP) are the only other stocks with portfolio weight above ten percent, at 14.30% and 12.54%, respectively. Out of 41 companies in total, Buffett added new weight to four existing holdings:

• Occidental Petroleum (NYSE: OXY) – up 2.93% – oil and gas company
• Chubb Ltd (NYSE: CB) – up 4.28% – insurance company
• Liberty SiriusXM Group – up 7% across LSXMA and LSXMK – subscription and ad-based audio entertainment company
• Sirius XM Holdings (Nasdaq: SIRI) – up 262.24% – primary operating company for streaming and satellite services, created at the end of 2023 to simplify equity ownership

Amid the larger-than-expected selloff for the quarter, accounting for $75.5 billion worth of shares, Berkshire Hathaway increased its cash holdings to a record high of $276.9 billion, up from $189 billion in Q1 2024. This is consistent with investors’ tendency to hoard cash amid recession signals.

After all, investors with a long term view know that the stock market reaches new highs after every recession, making recession an investing opportunity. With that in mind, which stocks are newcomers in Berkshire Hathaway's portfolio and which one should be considered as robust?

Ulta Beauty, Inc. (Nasdaq: ULTA)

Across 1,385 locations, Ulta Beauty is one of largest US retailers for skincare, cosmetics, haircare and similar products catering to female customer base. According to similarweb traffic data, 79% of Ulta.com throughput comes from female visitors with the 25 – 34 age cohort at 32% representation.

This alone makes a bullish case for the company, considering that females spend significantly more on beauty products and are more easily influenced by social media. Furthermore, 43% of women use makeup daily. Although this habit predictably dropped by 20% since the 2020 lockdowns, it has been largely offset by the rise of men who use makeup, going from 4% to 15%.

Through in-store and online services, the company’s Ultamate rewards program also tethers habitual customers to enhance retention. In its Q1 earnings report, Ulta Beauty increased sales by 3.5% year-over-year to $2.7 billion. Although this generated $313.1 million net income, it is down from the year-ago quarter of $347.1 million.

The company opened 12 new stores, with only two closed. To bolster investor confidence, Ulta Beauty has a $1.8 billion stock buyback program remaining, with $285.1 million exercised in Q1.

Ulta Beauty’s Q2 earnings report is scheduled for August 29th.

Updated FY24 outlook points to slightly lower sales from $11.8 billion upper range to $11.6 billion. Having beaten four consecutive earnings per share estimates, the average ULTA price target is $451.94 vs current $375.60 per share. The low estimate is $325 while the high estimate is $525 per share.

Lastly, investors should be aware of the so-called “lipstick effect.” Counter-intuitively, this phenomenon shows that women tend to increase cosmetics spending during economic downturns.

Heico Corporation (Nasdaq: HEI)

The second newcomer to Berkshire Hathaway’s portfolio alongside Ulta Beauty, Heico specializes in jet engines and other aircraft components. Across its two revenue divisions, Flight Support Group (FSG) and Electronic Technologies Group (ETG), Heico operates in a sector with a high barrier to entry owing to FAA scrutiny and established technical expertise since 1957.

Heico leadership owns ~20% of HEI stock, which has gone up 35% year-to-date. Ending April 30th, Heico reported $260.38 million net income, up from $218 million in the year-ago quarter. The company ended the quarter with 60% more cash and cash equivalents, at $204.16 million.

Like Ulta Beauty, Heico also beat earnings per share estimates for the last four consecutive quarters. The company’s next earnings report is scheduled for August 27th. Against the current price of $241.45, HEI stock is forecasted for an average price target of $239.64 per share.

For the last 52-weeks, the average HEI price held at $191.41. Considering that Heico is one of major US military suppliers, investors are speculating that the volatile Middle East situation will continue to boost its bottom line.

The Kraft Heinz Company (Nasdaq: KHC)

As one of Berkshire’s existing holdings at 3.75% portfolio weight, this consumer staples company falls into a recession-resistant category. Kraft Heinz has over 20 brands that are typically found in every household worldwide.

Ending six months on June 29th, the company reported $904 million net income vs $1.8 billion in the year-ago period. Kraft pointed to higher tax expense and a non-cash impairment loss of $854 million, suggesting that intangible assets were overvalued on Kraft’s balance sheet. This is why the accounting charge didn’t affect cash balance, having decreased from $949 million to only $902 million.

Against the present price of $34.64, KHC stock is forecasted for a $37.36 average price target, with the low estimate of $34 currently aligned. The high estimate is $43 per share. Kraft’s all-time high price was $69.23 in February 2017, with the 52-week high at $38.96.

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