Prominent billionaires just bought the dip with these 3 stocks

Hedge funds and investment firms with more than $100 million in assets are required to disclose their stock portfolios throughout the year. Updates for the second quarter of 2024 are available now, and they include updates from financial vehicles managed by major billionaires Warren Buffett and Bill Ackman, as well as multi-millionaire Michael Burry.

This wealthy trio has been busy buying dips for three value stocks: The ultimate beauty (ULTA 3.21%), NIKE (NKE 0.53%)and Shift4 Payments (FOUR -0.30%). Here’s why these bargains were too good for these investors to pass up.

1. Ulta Beauty: Down 33%

At the time of writing, shares of Ulta Beauty are down 33% from their all-time high and are down 22% in 2024. Shares began falling after management warned of slowing cosmetics sales, which which led her to lower the company’s financial guidance for the entire year.

It was too good a drop for Warren Buffett to pass up. His Berkshire Hathaway opened a roughly $260 million position in Ulta Beauty stock in Q2. Granted, that’s a small position for a company as large as Berkshire, but it’s still worth noting.

Buffett is a renowned value investor and likely sees potential in Ulta Beauty. The stock trades at less than 15 times earnings, which is significantly cheaper than the average price-to-earnings (P/E) ratio for S&P 500as seen below.

Data by YCharts.

Sales growth may be slow. However, Ulta Beauty still expects to earn more than $1.5 billion in operating profit in 2024 and plans to return $1 billion to shareholders through share buybacks. Given the steady demand for cosmetics, I expect strong earnings and share buybacks to continue in the coming years, providing a strong chance of long-term positive returns for Ulta Beauty stock here.

2. Nike: Down 53%

In Q2, Bill Ackman’s Pershing Square bought more than 3 million shares of sportswear company Nike — a position worth about $229 million. It’s the smallest position in Ackman’s portfolio, but with only eight stocks in his total portfolio, any addition is worth noting.

Ackman is a value investor who studied Warren Buffett’s style before starting his own startup. Nike really looks like a value stock considering it’s trading at its cheapest valuation since 2012.

In short, Nike stock is down because sales are down and profits are shrinking. The company’s 2025 fiscal year began in June, and management is calling it a “transition year.” Management expects its revenue to fall by single digits compared to fiscal 2024, but profits could fall more than that.

Ackman is likely betting that a consumer brand as strong as Nike will eventually find its way, making the stock a strong candidate for a comeback once its business stabilizes.

3. Shift4 Payments: 20% off

Like Ackman, Michael Burry manages a concentrated portfolio of just 10 stocks through Scion Asset Management. The investor famously made his fortune by shorting the US housing market during the Great Recession. Judging by his portfolio today, I’d say he’s still not very bullish on America.

Three of Burry’s top five positions are Chinese stocks, showing his preference for those companies. However, in Q2 he made a big move on financial technology (fintech) company Shift4 Payments, making it nearly 14% of the portfolio.

Shift4 stock may not drop as much as the other two in this article. However, the stock has gone nowhere over the past three years, as the chart below shows, even though the profitable growth during that time has been impressive.

Data by YCharts.

Shift4 focused on winning large, high-volume customers, which delivered strong revenue growth. Adjusting for network fees (a common adjustment for fintech companies), the company expects to grow its revenue by at least 44% this year. And it expects to generate nearly $400 million in free cash flow.

For perspective, Shift4’s market cap is only $5.4 billion at the time of writing, which means it’s trading at a cheap valuation from a forward price to free cash flow of about 14. Along with its growth impressive, I think Shift4 Payments stock might be the best buy of these three stocks.

To be clear, Ulta Beauty and Nike are cheap based on valuation multiples, which is good. But there are also more mature companies with limited growth potential. Either stock could have an edge, but Shift4 is still growing at a fast pace in addition to being cheaply valued. This could lead to higher earnings in the coming years.