Unilever (LSE: ULVR) shares were the party pooper in my portfolio in 2023. Now I’m thinking of giving them the elbow, but is that wise?
I had great fun in the second half of 2023 snapping up FTSE 100 shares for my new self-invested personal pension (SIPP). Having consolidated three legacy workplace and stakeholder pensions, I had a nice chunk of cash at my disposal and made good use of it.
I bought 10 different FTSE 100 shares and all are now in positive territory, with 3i Group and Taylor Wimpey up around 20%. Unilever is the only negative. It’s down 6.6% since I spent £2,000 buying 49 shares on 6 June, at a price of 4,038p. Today, they’re worth 3,800p.
My one notable flop
My initial £2k was testing the water. I had planned to top it up, as I did with nearly all of my other purchases. I bought Legal & General Group on three occasions, for example. Yet I couldn’t bring myself to average down on Unilever. Now I’m wondering whether to dump my portfolio’s sole loser and pump the money into one of its many winners.
But aren’t we supposed to be doing the opposite at this time of year? Many advisers suggest rebalancing portfolios annually, by selling winners and buying losers. Investing is cyclical. Sell high, buy low, etc.
Ultimately, it all comes down to the stock. Unilever was a blockbuster FTSE 100 performer for years, and I spent ages waiting to buy it on the cheap. I finally got my chance last year, when the valuation fell below 18 times earnings after years trading above 24 times. Today, it’s valued at 17.05 times.
The shares have struggled for years. They’re down 6.86% over five years and 9.57 over 12 months. They even missed the November and December rally. I’m not the only investor who’s wary.
New CEO Hein Schumacher admits Unilever has failed to match its potential. He plans to boost “growth, productivity and returns” by focusing on building up its 30 biggest brands, which represent around 70% of turnover.
A long way to go
Sales are still falling, down 3.8% in Q3 to €15.2bn. Unilever has more than 400 brands but is that too many? It’s a long time since I bought Bovril, Knorr, Lifebuoy or Viennetta. It’s good to have some old reliables, but where are the whizzy new growers?
New broom Schumacher has drawn comparisons with Tufan Erginbilgiç at Rolls-Royce. Both quickly identified serious problems at their new charges. So far, only Erginbilgiç has taken radical action.
I’m also wondering whether Unilever’s food brands could find themselves at the sharp end of the diet jab resolution. Will Ozempic and other appetite suppression drugs hit demand for Hellmann’s and ice cream brands Ben & Jerry’s, Cornetto, Magnum and Walls? Time will tell.
When I buy shares, I aim to hold them for at leat five or 10 years. I’ll stick with Unilever for now, but I won’t average down. Investing is cyclical, as I said, but Schumacher must work harder to make sentiment swing back in favour of the shares.
