With cosmetics stocks priced low, is now the time to spruce up your portfolio?

Cosmetics and skincare stocks should be an easy way to spice up a portfolio.

After all, these companies are players in a high-margin £230 billion global market, whose wares are convincingly promoted in social media tutorials.

But there is talk of a slowdown in the sector, where other companies envy its pricing power. As a result, investors looking to ‘zhuzh’ (beauty tutorial, proverb for ‘give a lift to’) their shares will be keeping a close eye on the upcoming IPO of Puig, the Spanish owner of the glamorous British brand Charlotte Tilbury.

Puig, a family-owned company, could be worth as much as £12 billion when it makes its debut on the Madrid Stock Exchange next month, highlighting demand for make-up and creams from an increasingly wide demographic in Europe and elsewhere.

As Rathbone’s David Coombs notes, skin cancer awareness means more men are using moisturizers, marking a lasting structural change in the industry.

Meanwhile, “tweens,” customers about to reach their teens, are a rapidly growing and informed customer base, buying for themselves and encouraging their mothers to spend. You can see this phenomenon in the aisles of Sephora, which is part of the top-performing division of LVMH, the luxury goods giant.

Sephora stocks more expensive lines such as Rare Beauty, the range founded by American actress Selena Gomez, plus the ‘viral dupes’ that provide fewer looks.

Yet the outlook suddenly seems uncertain, despite the popularity of Charlotte Tilbury and the buzz around newer products such as Bum Bum cream from Sol de Janeiro, a subsidiary of Occitane.

Analysts at broker Bernstein estimate that growth in the US may be only 7 percent this year, compared to 15 percent in 2023.

This has led to share price falls for L’Oréal, Ulta Beauty, an American chain, and Estee Lauder. This group has been left reeling by supply chain problems in China, although its diverse offering includes trendy Le Labo perfumes and Clinique creams.

Companies such as ELF (eyes, lips, face) were also affected by the more nervous mood.

Shares are down 15 percent this month but are up 1,348 percent in five years thanks to affordable dupes, or alternatives.

Do these declines suggest that the lipstick index hypothesis (in which spending on lipstick and other ‘bangs’ rises in tough times) is no longer relevant?

The index was created by Leonard Lauder, chairman of the group during the recession of the early 1990s.

Or have Estee Lauder’s woes colored the perception of the entire sector?

Fundsmith manager Terry Smith sold the fund’s stake in Estee Lauder earlier this year. However, he continues to hold LVMH, as well as L’Oréal, which allows investors in the fund – like me – to have exposure to brands like Lancome and Tween favorite CeraVe.

Coombs has also exploited the dip in Ulta Beauty shares to expand his funds’ holdings.

He points to Ulta’s strengths, including online sales and the social aspect of visiting its stores, which are located in shopping centers with parking.

Against this backdrop, I’m betting that consumers of all ages will continue to indulge in lipsticks and creams to reduce aging and sun damage.

I put some money into the UK’s biggest retailer of these items: Boots, the 175-year-old company, part of the US-based Walgreens Boots Alliance.

Rumors that parent company Boots will spin off may have died down. But the chain recently reported a 15 percent increase in sales, helped by the push for Sol de Janeiro and Shiseido brand Drunk Elephant.

This name raises a laugh line, or suggests that the innovation in this sector is such that it is worth the gamble.