Unilever’s (LSE: ULVR) a perfect stock for times like these. I bought the household goods giant last autumn when concerns over the health of the global economy went up several notches. And I’m pleased to say that it hasn’t disappointed me, its share price gaining 23% in that time whilst the broader FTSE 100 has crawled just 0.2% higher.
Incidentally, appetite for Unilever has really heated up since March as a range of macroeconomic worries, from the state of US-China trade talks to the possibility of a no-deal Brexit, have worsened. And ongoing worsening economic indicators are a good omen for extra share price strength in 2020.
Reassuringly brilliant
Most recent financials show why Unilever’s such a popular safe haven in tough times. The business said that underlying sales rose 3.3% between January to June, helped by an acceleration in the second quarter to 3.5% from the prior three months.
It’d be wrong to claim that everything is rosy over at the FTSE 100 firm though. Difficult trading conditions and wet weather in Europe meant that underlying sales dropped 0.6% in the first half, whilst in North America revenues flatlined, business here also hampered by poor weather.
That said, Unilever’s ability to keep growing sales at all shows just what a hassle-free stock it is in stressful times like these for the global economy.
The immense brand power of labels like Magnum, Dove and Persil, a quality preserved by the vast amounts it spends on marketing and product innovation, means that sales can be depended upon to keep growing irrespective of the mounting pressure on broader consumer spending power. This gives the company the sort of earnings visibility that most others can only dream of.
Indeed, this point was perfectly illustrated by latest profit warning data from EY Club in July. Whilst Unilever was affirming its full-year guidance following that strong first half, most recent EY data showed that there were 69 profit warnings issued between April and June, up 19% year-on-year and the highest second-quarter total since the financial crisis in 2008.
Hold on!
2019 has proved to be another year of success for Unilever, then, at least so far. And there’s plenty of reason to expect flight-to-safety buying of the stock to continue in 2020 as those aformentioned macroeconomic worries persist.
It’s also likely that the share price will continue to receive a bounce from the plummeting pound next year. Whether Britain extends Article 50 again to prolong its European Union purgatory, or embarks on a troublesome no-deal Brexit this October, it’s likely that the subsequent uncertainty will push sterling — which hit 10-year lows against the euro just this week — to more significant lows in the months ahead. And this will give businesses that report in foreign currencies, as Unilever does, an extra profits boost.
But this Foosie favourite isn’t just a terrific buy for the near term, of course. The key to successful stock investing is to buy stocks with a view to holding them for a minimum of five years. And thanks to the evergreen popularity of its formidable product stable, not to mention its rising might in fast-growing emerging economies (regions where underlying sales leapt 6.2% during January to June), it’s a share that I plan to hold for many years.
