Apple's new iPhone may be the talk of the town, but CNBC's Jim Cramer found a related story investors seem to be missing: better phone cameras mean more selfies.
"Thanks to the rise of the selfie generation, high-definition cameras all over the place mean one thing: If you're going to take zillions of photos of yourself and your friends, well, you've got to look a lot better than I do without makeup," the "Mad Money" host said. "So for a generation of people who are committed to posting pictures of nearly everything they do online ... cosmetics, for everyone, have become a must."
Estee Lauder, one of the world's biggest independent beauty companies, is the parent of brands including Bumble and Bumble, MAC, Clinique, and its namesake, Estee Lauder.
Coty, a century-old makeup play, owns 77 brands including Clariol and Covergirl. E.l.f. Beauty is a more affordable chain with a large online presence.
Similar as the businesses may seem, their stocks perform very differently. Coty is down 6 percent year-to-date after a disappointing earnings report. Estee Lauder, on the other hand, is a frequent visitor to the new-high list, up over 40 percent in 2017. Shares of e.l.f. have been under pressure lately, declining 25 percent since their first trading day in 2016.
How about their fundamentals?
Nearly one year ago, Coty bought 43 beauty brands from consumer products giant Procter & Gamble for $12.5 billion. The deal helped Coty push into hair care and snag a 13 percent chunk of the global color cosmetics market.
But while the deal looked promising, Coty's newly acquired hair care and luxury fragrance brands began to underperform, failing to recharge the company's sales growth. Last month, Coty released a much weaker-than-expected quarterly earnings report.
"My view? Coty got slammed for a reason, and until they get a handle on their many problems, I'd say this stock is about as toxic as the makeup that never makes it past the testing on [the] 'bunny rabbits phase' of development," Cramer said.
Estee Lauder is Coty's polar opposite. The makeup giant boasts a diversified portfolio of brands, an affinity for nurturing new brands and strong exposure to high-end beauty products.
The company also has a penchant for efficiency, unafraid of cutting costs to make business run smoothly. Its last earnings report handily topped analyst estimates thanks to a rapidly growing Chinese business, good organic growth and successful acquisitions of Becca and Too Faced.
Estee Lauder has also been focused on moving its business away from struggling department stores and towards specialty retailers like Ulta and Sephora thanks to its CEO, Fabrizio Freda.
"[Freda] understands that a lot of the underlying strength does have to do with [the iPhone] and other selfie-enabling smartphones, so this is a very derivative, outside-of-tech play on Apple's latest product," Cramer said.
E.l.f. Beauty is a smaller competitor, but the discount makeup retailer has been growing fast. E.l.f.'s earnings jumped by 500 percent in its most recent quarter due to strong-yet-steady revenue growth and budding relationships with vendors including CVS and Target.
E.l.f's stock dipped after its last earnings report despite a top- and bottom-line beat due to lighter-than-expected guidance, but Cramer said it might be worth buying on the dip.
"Here's the bottom line: sometimes, beauty is in the eye of the beholder, but when it comes to these beauty stocks, I'd say that Coty is objectively hideous right now, Estee Lauder's great-looking pretty much all the time, and as for e.l.f., [that's] more of a judgment call, but if you like beaten-down growth stocks, I think it could be for you," the "Mad Money" host concluded.