The Motley Fool

Unilever plc isn’t the only ‘expensive’ stock I’d consider buying today

How long can this current bull market continue? No one knows. However, if like me you’re beginning to get a little apprehensive at the market’s recent tendency to shrug off practically everything the world throws at it, it’s worth considering whether now might be the time to reduce your exposure to some of your more speculative or cyclical holdings for those that should be able to withstand most economic shocks. Here are just two examples of the latter.

Strong and steady

Boasting a bursting portfolio of brands, FTSE 100 consumer giant Unilever (LSE: ULVR) looks a solid option for investors seeking a bit more security. The psychological pull its labels have over shoppers ensures they won’t suddenly stop buying jars of Marmite, packets of Persil or bottles of Domestos in the event of a market correction. In times of trouble, familiarity and affordable quality bring comfort.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Given the above, it’s not surprising if Unilever continues to look expensive based on conventional metrics. While a price-to-earnings ratio of 22 means the shares will have little interest to value hunters, I think this valuation remains reasonable for the stability that such a company can bring to a portfolio. Although some of its top tier peers may offer more generous payouts, the 3% yield is also attractive. 

But there are plenty of other reasons for considering Unilever. Perhaps the most enticing of these — aside from the company’s long history of generating excellent returns on the money it invests — is the possibility of another bid from US rival Kraft Heinz following its failed $143bn approach earlier this year. 

In the meantime, I think recent weakness in the share price as a result of concerns over a slowing of organic growth in Q3 represents a great opportunity for investors to climb on board.

Buy the dip

Thanks to its fairly predictable earnings, Sutton Coldfield-based funeral services provider Dignity (LSE: DTY) is another company I’d consider buying on the suggestion that markets are looking overvalued. That’s in spite of today’s rather severe response to the latest trading update from the £1.2bn cap.

In line with expectations, revenue climbed 6% to just under £244m over the 39 weeks to 29 September. Underlying operating profit also rose 5% to £79.4m, even though the number of deaths recorded was only 1% higher than over the same period in 2016.

In addition to generating these far-from-awful numbers, Dignity has continued to capitalise on what remains a highly fragmented industry. So far in 2017, the company has acquired 24 funeral locations and one crematorium as well as opening 13 satellite locations. 

So, what’s behind this morning’s 8% share price slump? It’s likely a response to the company continuing to see “increasing price competition and new competitors“, despite strong performance from its pre-arranged and crematorium businesses. As a result, Dignity now expects incremental costs of up to £1m in 2017 in order to maintain standards of service and improve its digital presence. The firm also believes these costs will be a recurring expense in future years.

While rising costs and a more competitive trading environment are unlikely to cheer investors, the fact that full year expectations remain unchanged suggests to me that this reaction is overdone. Although its shares aren’t cheap at 20 times forward earnings, I remain convinced that it could be just the sort of stock to hold in volatile times. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.