China Still Looks Good For Unilever Plc

Although many commentators are calling the beginning of the end for China, I’m still bullish and believe it presents a great opportunity for Unilever plc (LON: ULVR).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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.

Read More

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

How many of my fellow Fools remember Japan in the 1980s?

For those of you who don’t, Japan was the next big thing. It was going to be the biggest economy the world had ever seen and was simply unstoppable. It was going to dominate the world economically, pushing the US and Europe into second and third places respectively.

Then, it crashed.

Since then it has endured a very long “lost decade”, with the Japanese stock market still being some way off its all-time high.

So, commentators are understandably wary about saying that China is going to become the biggest economy in the world. After all, we’ve been down that ‘road’ before with Japan, haven’t we?

However, I believe that the Chinese growth story still has a long way to go. Indeed, in recent weeks the signs from China have been improving.

Trade data showed record monthly imports of a wide range of commodities, including iron ore and oil. Meanwhile, industrial production at large enterprises (a measure that tends to be closely linked to GDP) increased by 9.7% versus July 2012.

Furthermore, a recent flash purchasing managers index (PMI) figure showed growth for the first time in four years.

So, Chinese growth may not be over just yet and I think one company that can benefit from this growth is Unilever (LSE: ULVR) (NYSE: UL.US).

A key reason for this is that Unilever is being extremely shrewd in its approach to China and other emerging market economies. It is accepting slightly lower prices than it could otherwise achieve so as to ensure that its products are very widely stocked. It also heavily incentivises local sales agents so that its products are prominently displayed in various outlets.

Doing so means that Chinese customers are trying Unilever’s products, often liking them and hence usually becoming fans of the brand. This means that Unilever is steadily building a loyal customer base in China, affording the company an extremely bright (and highly profitable) future.

Indeed, with shares trading on a price-to-earnings (P/E) ratio of 17.6, this compares reasonably well to the FTSE 100, which has a P/E ratio of 14.9. Although it has a higher P/E, I believe Unilever deserves to trade on a premium to the wider index as a result of its impressive long-term growth prospects.

Of course, you may already hold Unilever or be looking for another idea that could give your portfolio a boost.

If you are, I would recommend you take a look at this exclusive report entitled The Motley Fool’s Top Growth Share.

It’s completely free and without obligation to view the report – click here to take a look. It could be well worth checking out if, like me, you are a growth-seeking investor.

> Peter does not own shares in Unilever. The Motley Fool has recommended shares in Unilever.

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.

More on Investing Articles

Investing Articles

£10,000 invested in Barclays shares 1 month ago is now worth…

Barclays shares have carried on where they left off in 2024, by climbing far faster than the FTSE 100. Harvey…

Read more »

Investing Articles

I’ve been watching the easyJet share price like a hawk. Here’s what it did last week

Harvey Jones can't take his eyes off the easyJet share price. He thinks it looks good value and ready to…

Read more »

Investing Articles

A £10,000 investment in Nvidia stock 6 months ago is now worth…

Nvidia stock's shown a lot of volatility for a mega-cap company in recent weeks. Dr James Fox explores how an…

Read more »

Investing Articles

4 reasons Ferrari could continue to be a stock market winner

The global luxury goods market may have struggled in recent years, but you wouldn’t guess that from Ferrari’s soaring stock.

Read more »

Investing Articles

5 perfect starter stocks to consider for a Stocks and Shares ISA in 2025

Wondering which shares to buy for a newly opened Stocks and Shares ISA? Our writer thinks these five investments are…

Read more »

Row of terrace houses.
Investing Articles

Thinking about buy-to-let? Consider these UK stocks instead

Owning UK property stocks could be a better way to invest in buy-to-let, though there are drawbacks. Royston Wild explains.

Read more »

Investing Articles

Here’s a plan to target £7,500 a month in passive income

This writer outlines a roadmap that someone could consider taking to try and aim for a substantial future passive income…

Read more »

Young female hand showing five fingers.
Investing Articles

5 FTSE 250 stocks Fools are backing for promotion to the FTSE 100 this year

Can Vistry make an imminent return from the FTSE 250? One Fool thinks so -- read on to find out…

Read more »