Why Reckitt Benckiser Group plc, Unilever plc and Premier Oil plc could be the perfect portfolio

How you can construct a winning portfolio with Reckitt Benckiser Group plc (LON: RB), Unilever plc (LON: ULVR) and Premier Oil plc (LON:PMO).

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When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

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The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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The aim of the game with investing is to protect and grow your capital. Trying to achieve the most capital growth, while at the same time protecting your downside is a tricky balancing act. It’s very easy to buy a selection of stocks with the highest return potential without considering what the possible downside might be. 

On the other hand, the safer stocks are usually mature companies with uninspiring growth outlooks, that don’t offer much in the way of capital growth over time.

So, to build the best portfolio, it’s usually sensible to combine safer stocks and those opportunities that offer more room for capital appreciation. And when it comes to safe stocks, Reckitt Benckiser (LSE: RB) and Unilever (LSE: ULVR) have all the hallmarks of investments that you can buy, forget and trust to grow your investment over time.

Seeking safety 

Reckitt and Unilever are two of the world’s largest consumer goods companies. There are many leading consumer brands under their umbrellas, and it’s unlikely that the sales of these products will evaporate overnight. Moreover, these two companies have pricing power and can price their products how they see fit, steady price increases alongside inflation will ensure that Reckitt and Unilever will continue to report steady sales growth for years to come.

Simply put, if you want slow and steady growth from your investment, Reckitt and Unilever are two of the best opportunities around. Shares in Unilever currently trade at a forward P/E of 21.4 and support a dividend yield of 3.8%. Reckitt currently trades at a forward P/E of 26.1 and supports a dividend yield of 2%.

Looking for growth

As two of the largest consumer good companies in the world, shares in Reckitt and Unilever are unlikely to rack up a market leading performance any time soon. Slow and steady is the name of the game with these giants. On the other hand, shares in Premier Oil (LSE: PMO) look primed to achieve some impressive share price appreciation for investors as the price of oil recovers because the company is one of the UK’s best-managed oil groups.

In Premier’s May trading operations update management announced that the company is on track to meet its production target for the full year. It also said operating costs were tracking 10% to 20% below the figure budgeted at the beginning of the year and the group has significant liquidity with cash and undrawn bank facilities of $750m. All in all, operationally Premier is a great company, but the group’s success is dependent on a recovery in the price of oil.

Until oil prices recover, Premier is at the mercy of the market, which is why investors should hold the company as part of a well-diversified portfolio to minimise potential losses if the oil market suddenly takes a turn for the worst.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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