An investor’s dream is a company with unlimited customers who want the product and will never stop buying it. There are few in the world that have this built-in advantage, but one for sure is the cosmetics industry. Merrill Lynch recently surveyed 1,000 women between the ages of 18 and 29 to find out about purchasing habits in makeup, skin care and perfume.

The Merrill Lynch report shows what many would suspect. Young women in the millennial generation are big buyers and users of the top cosmetic products and will continue to be. The analysts highlight three companies that will benefit: Coty Inc. (NYSE: COTY), Estee Lauder Companies Inc. (NYSE: EL) and Sally Beauty Holdings Inc. (NYSE: SBH). All three are rated Buy at Merrill Lynch.

Coty

This company showed up extremely well in the Merrill Lynch survey. In fact, Coty is the purveyor of 80% of the brands that the millennial females liked in the survey. These are known as the “Power Brands” and include OPI, Marc Jacobs, Rimmel, Philosophy, Adidas, Calvin Klein, Sally Hansen and Chloe. OPI, which is the nail brand for Coty, did extremely well in the survey, which is good as it accounts for 15% of the company’s total sales. In fact, it was the most-loved brand, according to one of the survey questions.

Coty investors are paid a small 0.8% dividend. The Merrill Lynch price target for the stock is $25. The Thomson/First Call consensus price target is lower at $22.73. Shares closed most recently at $23.64.

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Estee Lauder

This is a premiere brand and brand name for cosmetics and fragrances. The Merrill Lynch team pointed out that in the survey price was one of the important factors in purchases. The portfolio of products for the company are considered prestige or more expensive. Despite that issue, 15 brands in the Estee Lauder portfolio were highlighted as favorite brands, which made it the most represented company in the Merrill Lynch survey.

Clinique ranked very well in the survey, and interestingly enough, despite price being an important consideration, product quality was important, and many of the women said they would buy higher end products as their purchasing power improved. That is good sign for the company.

Estee Lauder investors are paid a 1.3% dividend. The Merrill Lynch price target is $92, and the consensus estimate is at $87.95. The stock closed Wednesday at $84.16.

Sally Beauty

Sally Beauty operates as a specialty retailer and distributor of professional beauty supplies primarily in North America, South America and Europe. The company operates through two segments: Sally Beauty Supply and Beauty Systems Group. The survey showed that the women preferred both value and good options when purchasing the products they use daily. The management at the company is working diligently to improve the shopping experience both in the store and online.

The Merrill Lynch price target for is set at $$37, and the consensus target is posted at $35.91. Shares ended the day Wednesday at $33.61.

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With a never-ending flow of current and new customers, the cosmetics industry is a solid growth buy for investors. Placing bets on these top names to buy makes sense in what is a dynamic but very competitive sector.

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