Up 40% In 2025, Warren Buffett Sold This Top Stock Before Its Hot Streak. Is It Too Late To Buy Now?

Longtime Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) CEO Warren Buffett retired his post at the end of 2025 as one of the greatest investors of all-time. Over the past 60 years, since Buffett became CEO of the conglomerate, Berkshire's stock portfolio has had an average annualized return of nearly 20% -- essentially doubling the 10% return of the S&P 500 over the same period.

But even the Oracle of Omaha made mistakes, as Buffett freely admits. In his 2024 shareholder letter, Buffett actually had a subhead titled "Mistakes – Yes, We Make Them at Berkshire."

"During the 2019-23 period, I have used the words "mistake" or "error" 16 times in my letters to you. Many other huge companies have never used either word over that span," he wrote.

While mistakes are inevitable, Buffett added in that same letter to shareholders that the "cardinal sin is delaying the correction of mistakes or what Charlie Munger called 'thumb-sucking.' Problems, he would tell me, cannot be wished away. They require action, however uncomfortable that may be."

Image source: The Motley Fool.

That brings us to one of Buffett's biggest mistakes in his final years at Berkshire Hathaway -- Ulta Beauty (NASDAQ: ULTA) -- but maybe not for the reasons you think.

The Ulta Beauty blip

Ulta Beauty is the leading chain for beauty supplies, products, and salons -- a one-stop shop for all things beauty-related.

Buffett and Berkshire Hathaway purchased about 690,000 shares of Ulta valued at around $266 million in the second quarter of 2024. It was a small stake for Berkshire, representing about 0.10% of the portfolio at the time, but significant, as it was a new add.

The next quarter, Berkshire reduced its holdings in Ulta dramatically, selling off all but some 24,000 shares valued at around $9 million.

And by the Q4 of 2024, Buffett had entirely exited his stake in Ulta Beauty.

Buffett and his team never explain why they make the moves they do, at least not at the time, so it's not clear why they decided to invest in a stock and then completely bail on it in roughly 6 months. There are probably not many Buffett stocks over the year that have gotten such a quick hook.

It was apparently seen as a mistake that couldn't be wished away and required action, paraphrasing Buffett's own quote from above. But was the correction of the the mistake the actual mistake?

Ulta Beauty would have been one of Buffett's top stocks of 2025

Ulta Beauty stock fell about 11% in 2024 to end the year at around $435 per share. But in 2025, Ulta Beauty stock soared roughly 40%, to finish the year at $605 per share.

Other than Alphabet (NASDAQ: GOOG), which soared 65% in 2025, Ulta Beauty would have been the best performing stock in the Berkshire Hathaway portfolio in 2025 had Buffett not sold if off. And Buffett didn't add Alphabet until midway through 2025, so it could be said that Ulta would have been the best performing Buffett stock of 2025 among those held at the start of the year.

That said, Buffett did probably make money on Ulta stock. He bought the stock in Q2 2024 when it had dipped about 20% year-to-date to around $380 per share. When he sold in Q4, it had reached about $440 per share, so he had a roughly 15% gain. Still, the stock obviously had some more room to run.

Over time, Ulta has been a strong performer, with an average annualized return of about 18% over the past 5 years and 14% over the past 10 years.

Does Ulta Beauty stock still have room to run?

Looking ahead, Ulta Beauty stock does still look like a solid option.

Ulta Beauty was firing on all cylinders in 2025. In the latest quarter, Q3, it posted a 13% increase in net sales to $2.86 billion. Comparable store sales jumped 6.3%, up from 0.6% the same quarter a year ago. For the first three quarters, sales rose 9% to $8.5 billion while comp sales increased just 0.3% from the previous nine-month period.

The turnaround started about a year ago in January 2025 with the hiring of new CEO Kecia Steelman, who unveiled her turnaround plan last March, Ulta Beauty Unleashed.

As introduced in the Q4 2024 earnings call, Steelman said the plan will focus on "best-in-class execution," brand building, personalization, and digital acceleration. That involves investing in its stores, creating a new online Ulta Beauty Marketplace, introducing new brands including exclusives, and deepening guest engagement through personalization and other means.

The plan is already producing results, as evidenced by the gains in recent quarters. And Ulta Beauty raised its sales guidance by $200 million to $300 million for the full fiscal year and lifted its comparable sales growth by more than a percentage point. In addition, it raised the earnings per share (EPS) guidance by more than $1 to a range of $25.20 to $25.50.

Based on its growth expectations, its solid cash flow, its reasonable valuation, and its investment and expansion plans, Ulta Beauty still looks like a good option for investors despite the stock's recent rise.

And it's worth echoing Buffett -- that all investors make mistakes during their lifelong journeys. But never delay an uncomfortable action to remedy a money misstep.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, and Ulta Beauty. The Motley Fool has a disclosure policy.