Buffett Bet Big on Beauty and Aerospace Device Last Quarter: What Did He See This Time?

At the beginning of this month, Buffett's moves of reducing his holdings in Apple and selling Bank of America once triggered market panic and also made many people curious about the reasoning behind these transactions.

Now, with the release of Berkshire Hathaway's 13F report for the last quarter, the logic behind Buffett's moves has been revealed - this veteran investor seems to have found new investment opportunities.

Data disclosed on Wednesday shows that in the last quarter, Buffett's Berkshire Hathaway made some adjustments to the company's investment portfolio, including increasing its holdings by 700,000 shares in the retail cosmetics chain Ulta Beauty Inc. and 1.04 million shares in HEICO Corp. According to regulatory filings, Buffett's company spent nearly $500 million on these stocks.

In addition, Buffett continued to increase his holdings in Occidental Petroleum, Sirius XM, and Chubb, which was first disclosed in the last quarter.

In terms of reduced holdings, besides the much-noticed Apple and Bank of America, Berkshire Hathaway also sold some shares of Chevron and the communications giant T-Mobile and completely cleared the positions in the American cloud computing company Snowflake and the media group Paramount Global.

However, after a series of operations, the order of Berkshire's main holdings did not change - Apple, Bank of America, American Express, Coca-Cola, and Chevron still occupy the top five positions. The company's cash reserves reached $276.9 billion, reflecting Buffett's cautious attitude toward the prospects of large-scale investments in the current market environment.

As for the purchase of Ulta Beauty and HEICO in the last quarter, the regulatory filings did not specify whether this was Buffett's operation. However, HEICO's co-president Eric Mendelson said he was honored that Berkshire invested in the two companies, and believed that the decentralized business model might be the key to attracting Buffett's attention to his company and Ulta Beauty.

Ulta Beauty is a one-stop beauty product retailer headquartered in Bolingbrook, Illinois. Its main business includes cosmetics, perfumes, nail art, body care products, beauty tools, and hair care products. This chain beauty retailer has about 1,395 stores in 50 states in the United States, covering up to 500 brands, and recorded revenue of $2.73 billion in the most recent quarter.

HEICO mainly produces supporting equipment for aircraft, spacecraft, defense equipment, medical equipment, and telecommunications systems. According to the official website, the company's main business consists of the Flight Support Group and the Electronic Technologies Group: the Flight Support Group is a reliable partner for major airlines around the world. In addition to distributing parts from various manufacturers (including non-HEICO products), the company also supplies important components to other equipment manufacturers and the U.S. military and is the largest independent supplier of aircraft parts approved by the Federal Aviation Administration (FAA).

HEICO's Electronic Technologies Group specializes in designing, producing, and selling complex, mission-critical, and high-reliability sub-components and subsystems used in aviation, defense, electronics, medical, telecommunications, and other complex systems. Considering the company's main business and product cycle, HEICO is considered by many investors to have a strong moat and stable profitability. As of Wednesday's closing, HEICO's stock price has risen by 32% this year.

It is worth noting that aerospace is also a field where Berkshire Hathaway has had deep involvement: in 2016, the company spent $32.1 billion to acquire aircraft parts manufacturer Precision Castparts - which is still Berkshire's largest acquisition to date - but the company later struggled due to the decline in air travel and the grounding of Boeing 737 MAX aircraft. Buffett later admitted that he overpaid for Precision.

However, at least from the market response, this investment in HEICO may bring a different outcome for Buffett and his Berkshire Hathaway: HEICO's stock price rose by 3% in after-hours trading, while Ulta Beauty, which was also favored by Berkshire in the last quarter, soared by 14%.

At this year's shareholder meeting, Buffett once said that American companies will continue to be the focus of future Berkshire investments because he is more familiar with the rules of the American market and the strengths and weaknesses of American companies. This American-oriented position has also helped him reduce the possibility of making major mistakes.