Looking to protect your wealth? Unilever isn’t the only stock I think should appeal

Growth may have slowed, but Paul Summers believes Unilever plc (LON:ULVR) remains a strong hold for defensively-minded investors.

| 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.

Shares in FTSE 100 consumer goods giant Unilever (LSE: ULVR) were on the front foot in trading this morning, despite the company posting a fall in underlying sales growth over the three months to the end of September. The 2.9% rise achieved by the £120bn-cap business over the third quarter of its financial year was down from 3.5% in Q2. 

That investors don’t seem all that concerned may be partly down to the fact the company’s performance in emerging markets was more encouraging. That highlights why geographically diversified companies such as Unilever can be ideal for most defensively-focused portfolios. In these markets, collective sales rose 5.1%. Overall revenue increased by 5.8% — in line with analysts’ forecasts, although this was helped by a 2.3% currency boost.

Investors are also likely to be relieved by the prediction full-year results will show an improvement in profit margins and “another year of strong free cash flow.” Looking ahead, Unilever said it was now anticipating underlying sales growth of somewhere “in the lower half” of its multi-year range of 3-5% in 2019. 

Newish CEO Alan Jope (who replaced Paul Polman at the helm late last year) seemed satisfied with these numbers, saying the performance had shown “a good balance between volume and price.” He also commented that the owner of ‘sticky’ brands, such as Marmite and Pot Noodle, was “taking action to remain relevant to the consumer of the future, such as setting stretching goals on plastic use.”

So, are the shares worth buying? Well, they certainly aren’t cheap, despite being 12%-or-so lower in value than the all-time high hit back in September. That said, the current price-to-earnings ratio of 21 is pretty much bang on its average valuation over the last five years, suggesting that new investors won’t necessarily be overpaying. A 3.1% yield, while nowhere near as high as that offered by other top-tier firms, is worth grabbing and should be adequately covered by profits. 

For me, Unilever is just the sort of stock to hold if markets get choppy. It won’t necessarily rise while others fall, but the predictability of its earnings should ensure any damage is both temporary and relatively limited. 

Another defensive demon

Another stock I think should appeal to defensively-minded investors is Robinsons and J2O owner Britvic (LSE: BVIC). Even if the UK does enter a recession, demand for small-ticket items, like the drinks produced by the FTSE 250 member, is unlikely to be hit as hard compared to those selling more discretionary items.

Things have been fairly quiet at the business since I last looked at its stock in July. The only real news was the appointment of a new chief financial officer (Joanne Wilson). To be honest, that’s how things should be with any company worth holding for the long term… no panic, no stress, just quietly chugging along.

Notwithstanding this, Britvic’s stock has been in scintillating form, moving almost 40% higher in the last twelve months alone. Following this strong performance, shares currently change hands for almost 19 times earnings. Again, that’s not cheap compared to the general market, but it does, I think, reflect the quality on offer (based on consistently stellar returns on capital employed). 

A secure-looking 2.8% dividend yield is another bonus, particularly for those only looking to protect their wealth in the event of an economic downturn.

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.

Paul Summers has no position in any of the shares mentioned. 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.

More on Investing Articles

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Would a stock market crash matter?

Christopher Ruane explains why a stock market crash could turn out to be positive, not negative, for a private investor…

Read more »

Investing Articles

Has the Rolls-Royce share price peaked?

After a strong 2023 performance and (so far) in 2024, the Rolls-Royce share price has stuttered in recent days. Christopher…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Turning a £20k ISA into a £13,900 yearly second income? It’s possible!

By investing a £20k ISA now using certain basic principles, our writer thinks he could set up a second income…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

With no savings, I’d follow Warren Buffett’s number one rule to build wealth

Can this one piece of Warren Buffett wisdom really help our writer as he aims to build wealth in the…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

A second income of £1k a month from just £10 a day! How would I do that?

Mark David Hartley considers how to build a second income stream starting from just £10 a day. Is £1,000 a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Turn £8,900 into a £24k annual passive income? Here’s how!

Christopher Ruane applies some investing lessons from billionaire Warren Buffett when explaining how he'd aim to earn sizeable passive income…

Read more »

Young Caucasian woman holding up four fingers
Investing Articles

7%+ dividend yields! 4 FTSE 100 shares for investors to consider buying in April

These FTSE shares offer dividend yields comfortably above the index average of 3.7%. Here's why they could be good passive…

Read more »

Dividend Shares

£10k in an ISA? Here’s how to generate a ton of passive income

Passive income can provide a lot more financial freedom and security. Here’s an easy way to generate some within an…

Read more »