Why I see the Unilever share price fall as a great opportunity to buy!

With the FTSE 100 (INDEXFTSE:UKX) still in red and its own locational uncertainty resolved, Unilever plc (LON:ULVR) looks to me like a good defensive share to buy.

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As nerve-wracking as the continued tumble of the FTSE 100 can be as an investor, there is solace to be found within it. The solace comes in the form of high-quality companies that are currently trading at low prices, but are a long-term positive bet. I find Unilever (LSE: ULVR) shares particularly attractive in this regard.

There is a long list of reasons to remain positive on the company. The most topical of these right now is the fact that it has decided to remain headquartered in London. Unilever announced the move of its headquarters entirely to Netherlands in March 2018, which would have meant an exit from the FTSE 100 index. After much shareholder protest, however, the company scrapped the idea earlier this month, bringing recent investor uncertainty related to the company to an end. In principle, it might have been a good move to streamline the company further, but it was still apparently one that did not take enough consideration for shareholder sentiments.

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Likely because of this, damage to the Unilever share price was exacerbated, with a fall sharper in recent months than in the FTSE 100. For October so far, Unilever has been trading at an average price of 4,066p, which is 4.4% down from the September average price, and makes it the second consecutive month of share price falls. This is also over double the 2.1% fall in FTSE 100 over the period! As a result, Unilever is now available at a relatively cheap rate.

And this is at a time when the fundamental case to buy it remains in place. As a leading global consumer goods company with well-known brands like Dove and Lipton, its demand is stable. This makes it a good ‘defensive’ stock, which serves investors well in times of slump when a number of other sectors are witnessing declining demand. With Brexit looming large on the horizon, it is likely that the UK’s economic growth could see a dent, and some forecasters go so far as predicting a full-fledged recession. In this scenario, consumer staples companies like Unilever are among those least likely to be impacted. Moreover, much of the company’s demand comes from other countries, thus insulating it from economic conditions in the UK.

Last but not least, Unilever’s financials remain strong. The company has witnessed increasing profits for the past two years and revenues are set to show growth for the second year running in 2018. In its latest financial update released earlier this week, Unilever showed 2.9% sales growth up until the nine months of 2018. The company’s press release also maintained that sales will continue to be in the 3-5% range, with improvement in profits and a strong cash flow.

Unilever is not necessarily the stock to buy to make fast and big gains, but it is one to hold on to when anticipating rough weather.

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Manika does not currently own any shares of Unilever. The Motley Fool UK owns shares of and has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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