If I had the allowance and cash available for my Stocks & Shares ISA, I’d love to buy Unilever (LSE: ULVR), Legal & General (LSE: LGEN), and Aviva (LSE: AV.) shares.
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Here’s why!
What they do
Unilever is one of the largest consumer goods businesses in the world with immense brand power and an extensive reach.
Over a 12-month period, the shares are down 5%, from 4,137p at this time last year to current levels of 3,889p.
Legal & General is a financial services powerhouse best known for its life insurance offering. The shares are also down 5% over a 12-month period from 257p to 243p.
Last but certainly not least, Aviva is one of the biggest multi-line insurance businesses in the UK and Ireland. The shares have meandered up and down this past 12 months. They’re currently trading for 448p, which is the exact same level as this time last year.
The investment case
Consumer staples is a mammoth market, and I’d happily argue Unilever is one of the best in the business. Its brand power and reach is enviable. However, recent volatility has pushed the shares down. I see this as an opportunity to buy the shares at levels not seen for a while. They currently trade on a price-to-earnings ratio of 15. Plus, a dividend yield of 3.8% is attractive, although I understand dividends are never guaranteed.
Finally, the business is looking to change things up. It’s looking dispose of lesser performing brands and focus its investment and energy on better performing ones. This could help boost performance and returns in the future.
From a bearish view, continued inflationary pressures and volatility could hurt margins and consumer spending. For example, consumers could continue to look for cheaper non-branded products to make their budgets stretch further.
Legal & General’s dominant market position, iconic brand power, and huge customer base make it an enticing prospect for me. As the UK population increases and is ageing, many are starting to think about their golden years. This is where Legal could see performance and sentiment boosted. Right now, the passive income opportunity looks too good to miss with a dividend yield of 8%.
Looking at risks, as the pensions market is a lucrative one, the threat of competitors is one I’ll keep an eye on. This is because a rising number of firms in the space could put profit margins under pressure.
Aviva’s main offering, car insurance, offers it defensive traits, in my view. This is because car insurance is a legal requirement in the UK. Plus, like Legal & General, it could find performance boosted as the ageing population in the UK is looking to save for retirement. The business has long been a passive income gem, in my view, and currently offers a yield of 7.5%.
Taking into account some risks, Aviva’s growth over the years has been driven by acquisitions. These are great when they work out. However, when they don’t they can be costly to dispose of. This can damage a firm’s balance sheet, sentiment, and return levels. So I’ll keep an eye on future acquisitions.
