Nelson Peltz is selling but the Unilever share price is up! What’s going on?

The Unilever share price has risen despite one of the company’s largest shareholders selling part of his stake for £181m. Could now be a good time to buy?

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Image source: Unilever plc

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Since 9 August, the Unilever (LSE:ULVR) share price has increased by 4% (at 30 August).

This is despite Trian Fund Management, the investment firm found by activist investor Nelson Peltz, offloading 3.82m shares in the company at a weighted average price of £47.33.

Peltz is also a director of Unilever.

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The sale yielded £181m. But the fact that such a prominent figure has decided to reduce his holding doesn’t seem to have deterred others from buying.

Date of saleNumber of shares soldAverage price (£)Sales proceeds (£)
9 August2,931,12747.38138,876,797
12 August738,47147.1934,848,446
13 August155,00047.117,302,050
Totals3,824,59847.33181,027,293
Source: company announcement

The announcement to the stock exchange didn’t provide any clues as to the reasons behind the sale. It vaguely refers to “portfolio management” as the primary motivation.

But as the saying goes, one person’s trash is another’s treasure. The company’s share price has been pushed higher as investors — not being put off by the sale — want a piece of the consumer goods giant.

A former shareholder

I used to have a stake in Unilever. But I got frustrated as the share price seemed unable to break through the £43-barrier.

Since then it’s risen by around 14%. Despite this, I don’t regret selling — I’ve done better elsewhere. 

Created with Highcharts 11.4.3Unilever PriceZoom1M3M6MYTD1Y5Y10YALL2 Sep 20194 Apr 2025Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202020202021202120222022202320232024202420252025www.fool.co.uk

However, Unilever is a quality company with an impressive portfolio of household brands. It consistently generates €10bn-€11bn of cash from its operating activities.

Source: Unilever website

Its results for the first six months of 2024 revealed sales growth, both in terms of price and volume. And its operating margin improved.

This success is attributed to focussing on the company’s top 30 brands, which account for approximately 75% of turnover.

The group’s continuing strong performance casts doubt on the idea that consumers are becoming increasingly price sensitive and swapping better-known names for cheaper alternatives.

But surely there’s got to come a point when it’s no longer possible to raise prices without damaging earnings?

I can’t believe how expensive some of Unilever’s products have become, especially when compared to many supermarket own-brands. Personally, I think we might be close to ‘peak prices’ for many of its products.

Too pricey

Similarly, I think the company’s shares are expensive.

Analysts are expecting underlying earnings per share of €2.76 (£2.33) for the year ending 31 December 2024. This implies a forward price-to-earnings ratio of around 21. This is on the high side, even for a member of the FTSE 100.

And it’s slightly above its five-year average.

Nor does the stock appear to offer good value when compared to that of, for example, Reckit Benckiser, which trades on a forward multiple of 13.7.

Underwhelming returns

Unilever’s dividend is also disappointing.

In 2023, the company paid 148.45p a share. If repeated this year, it implies a current yield of 3%. For an income investor like me, that’s not enough, especially from a company that’s something of a cash machine.

When I first bought the stock, it was yielding close to the Footsie average of 3.8%. For further comparison, Reckit Benckiser’s stock is currently offering a return of 4.4%.

It’s for these reasons — doubts over its ability to raise prices further, a toppy valuation, and a miserly dividend — that I don’t want to invest.

Pound coins for sale — 31 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Reckitt Benckiser Group Plc and 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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