The Motley Fool

Are Unilever plc, Imperial Brands plc and Mulberry Group plc the worst stock tips of all-time?

With smoking regulations becoming increasingly stringent across the developed world, buying tobacco stocks such as Imperial Brands (LSE: IMB) may seem foolhardy. After all, the health risks of smoking are becoming increasingly relevant to a more health-conscious consumer and with cigarette volumes falling year in, year out, now could be the time to sell tobacco shares rather than buy them.

However, this ignores two facts. Firstly, the world population is rising at a rapid rate. While there are over 7bn people globally today, there are expected to be almost 10bn by 2050. And while the proportion who smoke tobacco may fall in that time, this is likely to be more than offset by the overall population growth.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

Major growth in e-cigarettes

The second factor is that while tobacco is becoming less popular, e-cigarettes are a major growth area for companies such as Imperial Brands and could boost earnings over a sustained period. That’s because fewer people may kick their nicotine addiction and will instead use e-cigarettes as a substitute for tobacco. As such, now could be a great time to buy into Imperial Brands rather than selling.

Also appearing to offer a rather challenging outlook is Unilever (LSE: ULVR). The home products giant relies on emerging markets for the majority of its sales and with the largest of them all, China, seeing its growth rate slow, it could be argued that now is not the right time to buy Unilever.

However, this ignores the fact that China’s economy is transitioning towards a consumer-focused outlook. This means that Unilever could benefit from higher wages for workers in China which should increase demand for consumer-discretionary items.

While China is a key market for Unilever, the company remains geographically well-diversified so even if China disappoints, its other markets should be able to pick up the slack. Therefore, with excellent long-term growth prospects and less risk than many of its peers, Unilever could prove to be a sound buy.

Stunning growth forecast

Meanwhile, shares in luxury accessories brand Mulberry (LSE: MUL) have been strong of late, rising 8% in the last three months alone. A key reason is a stunning growth forecast with Mulberry expected to increase its bottom line by 120% in the current year, and by a further 82% next year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.6, which indicates it offers a wide margin of safety.

Mulberry endured a tough period in recent years when its ambitious move to a higher pricing structure proved unpopular with existing customers and failed to win over sufficient new ones. However, it now seems to have the strategy to record upbeat capital gains over the medium to long term.

Of course, finding stocks that are worth adding to your portfolio is a tough task, which is why the analysts at The Motley Fool have written a free and without obligation guide called 10 Steps To Making A Million In The Market.

It's a simple and straightforward guide that could make a real difference to your portfolio returns. As such, 2016 could prove to be an even better year than you had thought possible.

Click here to get your copy of the guide – it's completely free and comes without any obligation.

Peter Stephens owns shares of Imperial Brands and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.