Consider buying Oddity Tech (ODD), which is viewed as a significantly undervalued AI-driven beauty company whose stock has fallen over 50% without negative news. The company acts as a "brand machine," successfully launching billion-dollar brands like Il Makiage and Spoiled Child by using AI to offer personalized products directly to consumers. This technology gives ODD a powerful competitive advantage over slower, traditional competitors like L'Oreal and Estee Lauder. Financially, the company is strong, consistently beating its growth and profitability targets. The recent stock decline presents a potential buying opportunity in a disruptive company that the market seems to be overlooking.

Oddity Tech (ODD)

The speaker presents a very bullish case for Oddity, calling it "entirely ignored and entirely undervalued" and referring to it as the "Hims of beauty."

• Stock Performance: The stock is down 53% over the past six months, a drop the speaker believes is unjustified as the company has had "zero negative news." This decline is seen as a buying opportunity.
• Business Model: Oddity is described as a "brand machine" and a technology platform that uses Artificial Intelligence (AI) to launch and grow direct-to-consumer beauty brands.
  • Il Makiage: The company's first billion-dollar brand. It uses AI and hyperspectral vision to create custom-matched foundation, solving a major pain point for consumers.
  • Spoiled Child: The anti-aging brand, which is on its way to becoming a billion-dollar brand. It uses an AI called "Spoiled Brain" to recommend personalized skincare routines from over 4,200 possible combinations. It operates on a subscription model and has developed proprietary compounds like Odil 1204.
  • Methodic: A newly launched dermatology brand that follows the Hims playbook. It uses an AI and a camera to replace a dermatologist for beauty-related skin issues, with a network of doctors to approve prescriptions.
• Competitive Advantage:
  • AI-Powered Personalization: Oddity's core strength is using AI recommender systems to offer one-to-one customized products, which legacy brands struggle to replicate. The speaker notes, "Oddity sees more faces in a day than a Sephora associate sees over her lifetime."
  • Blue Ocean Opportunity: The beauty industry is seen as a "blue ocean" with "bloated" and "asleep" legacy competitors like L'Oreal and Estee Lauder. These companies are constrained by the "innovator's dilemma" due to their reliance on physical distributors, which Oddity bypasses with its direct-to-consumer model.
  • Favorable Regulation: The cosmetics industry is "reasonably regulated," allowing Oddity to innovate and move much faster than companies in the healthcare space like Hims.
• Financials & Valuation:
  • The company has consistently guided for 20% revenue growth and a 20% EBITDA margin but has consistently beaten those numbers.
  • It is predicted to grow revenue at 24% over the next 12 months.
  • The current EBITDA margin is 29%, significantly higher than its guidance.
  • The speaker views the stock as "too cheap" and an "AI stock that Wall Street does not see coming."
  • Short interest is at 13%, which the speaker finds nonsensical.

Takeaways

• The speaker's core thesis is that Oddity (ODD) is a high-growth, AI-driven disruptor in the massive beauty market, yet its stock has been unfairly punished along with other innovative companies.
• The investment opportunity lies in the market's failure to recognize Oddity's superior technology, brand-building capability, and favorable competitive landscape compared to legacy players.
• Investors should look at Oddity not just as a cosmetics company, but as a technology platform capable of launching multiple billion-dollar brands, with significant growth potential ahead. The recent stock price drop could represent an attractive entry point.

Hims & Hers Health (HIMS)

Hims is used as a primary point of comparison to frame the investment case for Oddity. The speaker owns both stocks but highlights the different challenges each company faces.

• Stock Performance: The stock is down 64% over the past six months, which the speaker attributes to "so much negative news," including issues related to GLP-1s.
• Business Model: Hims is a telehealth platform with two main brands, Hims and Hers. It focuses on personalized health solutions and compounding medications, which has drawn the ire of "legacy TradHealth."
• Valuation & Sentiment:
  • On the speaker's preferred metric (enterprise value over growth), Hims is cheaper than Oddity, with a ratio of 0.05 vs. Oddity's 0.07.
  • The stock has a very high short interest of over 30%, indicating significant bearish sentiment from the market.
• Risks & Headwinds:
  • Hims operates in a heavily regulated industry and faces a "much bigger battle" against entrenched interests (like doctor's offices and the FDA) than Oddity does in the cosmetics space.

Takeaways

• While the speaker is a shareholder, the discussion positions Hims (HIMS) as facing more significant headwinds and regulatory risks than Oddity.
• The high short interest (>30%) suggests that many investors are betting against the stock, making it a higher-risk, contrarian play compared to the speaker's view of Oddity.
• The key insight is the contrast: both are tech-driven disruptors, but Oddity operates in a less regulated "blue ocean," potentially giving it an easier path to growth.

Investment Theme: AI-Powered Disruption

The podcast highlights a powerful investment theme: companies using AI-driven recommender systems to disrupt massive, traditional industries.

• The Playbook: The core strategy involves applying the same recommender system technology used by TikTok, Netflix, and Amazon to a different field: personal wellness.
  • Instead of recommending content or products to keep users engaged, these companies recommend personalized solutions to fix health or beauty issues.
  • This creates a powerful retention loop, as customers return because the service provides tangible, positive results for their well-being.
• Key Characteristics:
  • Direct-to-Consumer (DTC): Bypassing traditional middlemen and distribution channels.
  • Personalization at Scale: Using AI to offer customized products and routines to millions of individual users.
  • Brand Platforms: Building a core technology lab (Oddity Labs) that can be used to launch multiple, distinct brands within the same vertical.

Takeaways

• Investors should look for companies that are not just using "AI" as a buzzword, but are fundamentally applying recommender systems to solve real-world problems in large, inefficient markets like beauty and healthcare.
• The ability to create a "brand machine" on top of a core technology platform is a key indicator of long-term, scalable growth.
• This theme suggests that the biggest future winners may be tech companies that successfully enter and disrupt non-tech industries by offering a vastly superior, personalized customer experience.