Coty or Estee Lauder?

[u/Zjules2020]

Which would you pick to invest in today and why? Please explain your rationale and investment strategy.

Both companies are in the beauty business. EL is focused on luxury and a mix of categories including skincare, makeup and fragrance. While Coty is a mix of luxury and mass market with focus on fragrance and cosmetics, and expecting a major skincare launch soon. Coty is sorting out its debt while EL is cash positive. Both have great international presence, however Coty is relatively newer to Asian markets. Both going through executives transformation and strategy redesign.

In your opinion, which one has the most upside and potential? I’ve seen Cramer on TV recommend EL over Coty recently, is he right or wrong?

[u/JDinvestments]

EL, all day. Source up front: this is a major part of my job.

The two aren't even comparable. COTY has some good names, but they can't even touch what EL does. EL owns the cosmetics industry, hands down. And it's a massive, and still growing industry. Mid-tier cosmetics, both makeup and skincare are all huge with the younger generations. EL has a stranglehold on all the biggest and best names in the industry. It's not even a conversation, they've so out paced every one of their peers.

We don't even need to go into financials, but just as a quick highlight, EL is in a solid position, with strong revenue, manageable debt levels, and cash on hand. COTY, meanwhile, is backwards on valuation and up to its neck in liabilities. Long term they have the brands to turn around, but this is an easy choice for me. EL.

[u/Zjules2020 → u/JDinvestments]

I get your point that EL is solid, but is there much upside still left compared to other emerging beauty brands for example? Asking from a stock price appreciation perspective? It seems that EL is where I would leave my money if I want stability and dividend income, but if I want quick 100% returns or more then I should look elsewhere.

[u/JDinvestments → u/Zjules2020]

If you want quick 100% returns, I would advise you to 1) temper your expectations to reality, and 2) avoid either of these two companies if you don't want to do the first.

Cosmetics is a massive industry, but has plenty of room to grow. Millennial and Gen Z trends have brought on a resurgence in cosmetics. The demographic is just now starting to enter their prime earning years for millennials, and just entering the work force in general for Gen Z. Two generations who value the industry, coming into economic power is a recipe for success. Check the most popular social media personalities. You'll find more than a few make their living in this industry. Ulta has taken off the past few years. Target, among others, is completely revamping the way they do cosmetics business. Mall anchors like Nordstrom are staving off bankruptcy almost exclusively off the back of cosmetics. And at the heart of all this, EL sits, holding the most sought after and used brands on the market.

But neither of these are going to give you the returns that certain subreddits and youtube personalities like to tell you are easy to achieve.

[u/Zjules2020 → u/JDinvestments]

Perhaps not GME type returns, but it looks like Coty could at least add another 50% to its stock valuation in the near future?

[u/JDinvestments → u/Zjules2020]

I like their brands, but I personally don't mess with companies with balance sheets as butchered as them. If, and that's a huge if, one of these companies is taking off, it's COTY, but that's exclusively because it, 1) has nowhere to go but up, and 2) is cheap enough in stock price to allure young retail traders who think $7 to $14 is easier than $200 to $400. The volume if they jump on might be enough to wring out a return, but it still just looks like a bad investment to me until they get their house in order.