There may be no greater investor in history than Warren Buffett. Over nearly 60 years, his conglomerate, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), has almost doubled the annualized returns of the S&P 500. And while that may sound impressive on its face, it gets even more so thanks to the power of compound growth. From 1964 to 2023, the stock delivered an overall gain of 4,384,748%, absolutely crushing the 31,223% returns of the broad market.

To clarify, a $1,000 investment in Berkshire Hathaway made in 1964 would be worth more than $43 million today, while an identical investment in the S&P 500 would be worth only around $312,000. No wonder so many investors revere Buffett as a legend. And no wonder so many people follow his investing moves, which are revealed each quarter via Berkshire Hathaway's 13-F filings with the Securities and Exchange Commission.

Buffett and his lieutenants are selective about the stocks they buy, so plenty of investors took notice when one of the two new additions they made in the second quarter was Ulta Beauty (NASDAQ: ULTA). Berkshire Hathaway picked up 690,106 shares of the beaten-down cosmetics stock for its portfolio.

In many ways, Ulta looks like a classic Buffett buy, and he wasn't the only billionaire scooping up shares. Ken Griffin runs Citadel Advisors, the world's most successful hedge fund based on total gains. It has had a position in Ulta since 2010, and last quarter, it added 95,821 shares of the stock to its portfolio.

So should you follow Buffett and Griffin into Ulta now?

Why billionaires are buying Ulta

Ulta has been a longtime outperformer on the market. Despite its poorly timed IPO in late 2007, the stock is up more than 1,100% since then even with the recent pullback, easily outperforming the S&P 500.

In many ways, Ulta is a classic Buffett stock. It's a leader in the beauty retail niche, and now has more than 1,400 standalone locations across the country in addition to more than 500 small-footprint locations inside Target stores.

That penetration gives the company a reach that's arguably only rivaled by LVMH's Sephora, but Ulta has another advantage that no other beauty retailer of its size can match: Almost all of its stores have full-service salons. That gives it an edge over e-commerce companies.

For a long time, Ulta's business model allowed it to deliver steady growth, but the company ran into some challenges recently as competition has increased and it has arguably nearly saturated the beauty market.

Its beauty peers such as E.L.F Beauty and Estee Lauder have also struggled lately, which may indicate that weak consumer spending is an industrywide problem.