The consumer goods giant Unilever (LSE: ULVR) is looking to simplify its structure by moving to the Netherlands, meaning it will have to leave the FTSE 100.
Although many investors including Aviva and Lindell Train are openly opposed to the move, it is likely the company will end up getting its own way.
With that in mind, does that make now the ideal time to buy into the shares of another consumer goods giant, Reckitt Benckiser (LSE: RB), which is also a major FTSE 100 constituent?
Steady as she goes
Up to the announcement in March this year, Unilever had been an investor favourite, offering steady and dependable growth – resulting in those buying the shares being prepared to pay a premium. Defensive shares such as Unilever have been highly prized by those looking to grow their wealth against a backdrop of Brexit, a Trump presidency and other events that have created bouts of investor panic in recent years.
Reckitt Benckiser, although smaller than Unilever, has also benefitted from positive investor sentiment. The share price and dividend have been consistently edging up, which is great news for those holding the shares.
In its latest results, Reckitt’s first-half pre-tax profit rose 9.5% as it lifted its full-year revenue target on the back of strong infant formula sales.
Critically, the results showed its $17bn acquisition of infant formula group Mead Johnson was benefitting Reckitt and integration is on track and progressing well.
At the same time as these results, UBS posted an upbeat analysis stating that the quarter marked the “end of a long downgrade cycle for RB, in our view”.
Moving on from past errors
Reckitt is not immune, though, from making costly errors. Falling victim to a costly cyber-attack knocked the share price heavily in July 2017. Since then, though, the company has recovered and the impact on the share price and the company’s reputation has been minimal.
Another instance of succumbing to a data breach or cyber-attack would be much less forgivable. It seems though that all things considered, Reckitt has successfully moved on from past errors and could now be well positioned to benefit from Unilever shares dropping out of the FTSE 100.
A bright future
Reckitt to me looks like a great investment for anyone looking to grow their wealth through investing in stocks. Reckitt is a rare company that consistently provides its investors with both income and growth. The share price gains seen since the start of 2018 will continue and quite possibly accelerate if a major competitor drops out of the FTSE 100, I believe.
Even if investors can still buy shares in Unilever in 2019, I see no reason why Reckitt’s share price won’t still power ahead. Even without the backdrop of a major competitor leaving the UK, Reckitt is well positioned to keep growing and to keep elevating its share price.
Reckitt’s concentrated product portfolio, international markets, integration of a major acquisition and appeal to investors make it well worth researching further and are appealing to me at the current price. A price-to-earnings ratio of around 21 doesn’t put me off when the shares are so highly prized by investors.
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Andy Ross does not own shares in any company 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.