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Unilever today announced the following -- "Forecast sales growth for the year is now expected to be in the range of 2-3% (previously 3-4%), rising to 4-5% when the benefits of the acquisitions of Cressida, Slim.Fast and Ben & Jerry's are included."
You hear the odd story about someone who finds an old share certificate in their bottom drawer, having forgotten all about the initial investment. They go on to discover that this share certificate is actually worth quite a lot of money. The tale of Rosa Elizabeth Hargreaves and her Glaxo Wellcome (LSE: GLXO) shares is well worth a read.
The Qualiport hopes its current holdings will be suitable bottom drawer investments. Reality will be different. What do you think? The Qualiport discussion board awaits your thoughts.
Long-term means 5, 10, 20 or more years. The stock market as a whole is a relatively safe place to invest your money over those periods of time. This article titled "Shares Continue To Outperform All Other Investments" James Carlisle (TMF JimmyC) tells the tale.
By contrast, very few individual companies are suitable to be held for that period of time. Also, I'd very much contest that most people -- and by most I mean upwards of 95% of the investing population -- have the mental fortitude to hang onto a share for 10 or even 20 years. Unless of course they are stupidly waiting that long for a dog of a company to recover, afraid to sell just because they'd make a loss on the investment.
Unilever is a point in hand. We sold it after holding for less than 2 years. They are certainly going to be around in 10 and 20 years time, yet we couldn't see fit to hang on for the really long term. We had doubts about their acquisition of BestFoods (NYSE: BFO) and chose to dump them. However, in terms of Unilever's long term progress, this will probably ultimately be seen as just another acquisition along the long and winding road that is their corporate development.
Are we lacking mental fortitude? Perhaps. But, a $24 billion acquisition is no small change, and by Unilever's own admission, it will take 4 years or more to reap rewards. That's a long period of time, and doesn't deserve to be simply passed off as "we'll trust Unilever's management to get it right, and continue to hang on." Given the high price paid by Unilever for Bestfoods, we actually think Unilever will have to execute everything absolutely perfectly in order for the acquisition to ultimately pay off. In short, there's plenty of downside risks.
Growth Warning
It goes to show just how difficult it is for a company its size in a low inflationary environment to organically grow sales. The stock market was very unforgiving, slashing 41p off the shares today, with Unilever closing at 413p.
To some, this may make the Qualiport's sale at 441p look timely. I'd disagree. We sold for completely different reasons. And besides, the merits or not of our sell decision should be judged over a much longer time period than just a couple of weeks.
Bottom Drawer
The 'forgotten' shares are usually worth so much because of the length of period they've been held. In the case of Mrs Hargreaves, that was more than 50 years. Now that's what I call long-term investing!
I'd contest that if Mrs Hargreaves was an active follower of the stock market, she'd probably not have held onto her shares for 50 years. So much can go wrong with a company over that length of time, that it would be so tempting to sell out and take your profits. But no, Mrs Hargreaves just hung on in there, probably because she'd virtually forgotten about her holding, didn't follow the Glaxo Wellcome share price at all, and had no idea of the total value of her holding.
So, what are we to ascertain from all this?
Related Links
• Unilever sold