The Unilever share price recovery has finally begun and I think it will keep climbing

Harvey Jones decided the Unilever share price was ripe for a recovery. He took a chance on the FTSE 100 stock and now it’s starting to come good.

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The Unilever (LSE: ULVR) share price has had a solid year, and heaven knows it needed it. I’m thrilled, because I bought a stake in the company in June last year, hoping to get in ahead of the recovery.

The shares instantly fell another 10%. I wasn’t too worried. My minimum holding period is five years, and ideally, decades. I can afford to be patient.

It therefore suits me to buy top FTSE 100 stocks like Unilever when they’re down in the dumps as I can pick them up at a reduced price and bag a higher yield too.

FTSE 100 recovery play

The food and household goods giant had lost its way for years. It became too big and sprawling. Is it possible for one company to manage 400 brands and get the most out of all of them?

Former CEO Alan Jope’s solution was to try and spend £50bn adding the then-GlaxoSmithKline’s consumer health arm to the corporate soup, which showed he didn’t grasp the underlying problem. The bid failed. Jope was replaced by Hein Schumacher in July 2023.

Unilever shares are up 9.32% over 12 months but most of the action has come in the last three, when they jumped 16.44%. Yet I’m not kidding myself here. Schumacher hasn’t begun to turn the company around.

At least he seems aware of the scale of the problem. As he admitted in December: “The quality of our growth, productivity and returns have all under-delivered.” Amen to that.

What we don’t know is whether he’s tough enough to take the required action. He’s no Tufan Erginbilgic, who’s transformed Rolls-Royce at a speed that would probably make Schumacher’s head spin.

In February, we learned that Unilever’s 2023 underlying sales grew 7%, with underlying operating profit up 2.6% to €7.7bn. The board also announced a new €1.5bn share buyback, cheering investors.

Dividend growth stock

It cheered me too. I bought more Unilever shares in May, and again last week. So far I’m up around 6%, including two small dividends. Which ain’t much, but as I said, I’m in this for the long haul.

I’d like Schumacher to turn this ship around, but won’t panic-sell if he doesn’t. Someone will manage it, at some point. We might even learn what Wall Street activist investor Nelson Peltz is actually doing. He savaged Unilever for years, but has gone quiet since joining the board.

I was pleased to see JPMorgan Cazenove double-upgrade Unilever from ‘underweight’ to ‘overweight’ last month, and lift its the price target from 3,600p to 5,100p. Today, it stands at 4,414p, so that’s a jump of more than 15% if it happens. No guarantees, though.

The broker reckons the board is driving through much-needed “cultural change and corporate governance”, improving execution and transforming its portfolio with disposals. All of that will take time. As will a full-on Unilever share price recovery. I can wait. The recovery is coming. By getting in early, I hope to reap the rewards when it does.

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.

Harvey Jones has positions in Unilever Plc. The Motley Fool UK has recommended Rolls-Royce Plc and Unilever Plc. 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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