Why Unilever plc and Reckitt Benckiser Group plc are for life – not just for Brexit

This Fool thinks Unilever plc (LON ULVR) and Reckitt Benckiser Group plc (LON RB) are sound investments for the long term.

| 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.

Unilever sign

Image: Unilever. Fair use.

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.

If the UK votes to leave the EU on 23 June, London’s benchmark FTSE 100 index could be nursing a hefty 10% loss over the next 12 months, with certain sectors such as housebuilders and other cyclical sectors suffering greater losses according to UBS Wealth Management.

Adopt the brace position 

The view of the wealth manager suggests that the performance of London-listed companies is dependent on the outcome of the impending referendum. A vote to leave the EU could send the market crashing, while a remain vote could mean that the blue chip index could surge by 5% giving a 15% variance – a material amount.

In addition, it has been suggested that the pound could plunge to a low of 1.25 against the dollar on the event of a Brexit. These are lows that haven’t been seen for some time, though this would obviously boost earnings for those companies that conduct a meaningful part of their business overseas.

My personal view is simply that the market will remain volatile. As we’ve seen during this shorter week of trading, Mr market has been spooked by the re-emergence of the possibility that the UK voting public will actually vote to leave the single market. If there’s one thing that the market hates – it’s uncertainty. We witnessed this in spades during the build-up to last year’s General Election with housebuilders and some utilities seeing their share prices suffer owing to differing political policies, only to rally strongly when it became clear that there was an outright winner.

Buy defensive or buy for growth?

I’d be among the first to encourage fellow investors to adopt a balanced approach to their investing, with a portfolio consisting of both growth shares and stocks considered to be more defensive such as Unilever (LSE: ULVR) and Reckitt Benckiser (LSE: RB).

And while it can be foolish to shift your entire portfolio into more defensive shares during uncertain times such as these, there is, in my view a case to simply include these low volatility or low beta stocks as a mainstay of your portfolio, whatever the weather.

Indeed, turning to the 10-year chart below, which tracks the share price performance of both Unilever and Reckitt Benckiser against the blue chip index, we can clearly see that these boring shares have left the market for dust.

Getting rich slowly

And if the market-trouncing outperformance isn’t enough – just think of the dividends that have been paid to holders of these shares through both good times and the more difficult years. These dividends can sometimes mean the difference between positive and negative returns, especially in more difficult market conditions such as we’re seeing now.

Unfortunately, many novice investors will often hold a concentrated portfolio, usually compounded further by concentrating on a certain sector (usually the oil exploration and mining sectors).

Often this is folly and leads to either average or poor performance against the market, and as we can see from the chart, the FTSE 100 (excluding dividends) has essentially been flat over the last 10 years, which means that many will have suffered significant losses.

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.

Dave Sullivan 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.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »

Investing Articles

I think the Rolls-Royce dividend is coming back – but when?

The Rolls-Royce dividend disappeared in 2020 and has not come back. But with the company performance improving, might it reappear?

Read more »

British Pennies on a Pound Note
Investing Articles

Should I snap up this penny share in March?

Our writer is considering penny shares to buy for his portfolio next month. Does this mining company merit a place…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Stock market bubble – or start of a bull run?

Christopher Ruane considers whether the surging NVIDIA share price could be symptomatic of a wider stock market bubble forming.

Read more »

Investing Articles

Buying 8,254 Aviva shares in an empty ISA would give me a £1,370 income in year one

Harvey Jones is tempted to add Aviva shares to his Stocks and Shares ISA this year. Today’s 7.37% yield isn't…

Read more »

Investing Articles

Is the tide turning for bank shares?

Bank shares are trading on stubbornly cheap-looking valuations yet business performance in the sector is broadly robust. Should our writer…

Read more »