It’s clear by now we’re in the throes of a severe global recession. Lockdown measures continue to be rolled back, but the financial implications of the Covid-19 breakout will be harder to shake off.
Stock pickers need to be more careful in this tough macroeconomic and geopolitical environment. Current events don’t mean they need to run for the hills though. There remain plenty of FTSE 100 shares that should remain profit-making, even as a sharp downturn develops.
A perfect stock for a global recession
Unilever (LSE: ULVR) is a blue-chip I own. I bought it because its products remain in high demand even when broader consumer confidence sinks. Its products are expensive, relatively speaking. But they aren’t so dear that shoppers begin to shun them as their wallets become lighter.
The FTSE 100 comany’s beauty labels, household goods, and food ranges are popular for a number of reasons. It’s a result of the huge sums it pays to market them and keep them living in the public’s consciousness. It’s also because Unilever is committed to innovation to keep its brands fresh, talked about, and reflecting changes in broader consumer behaviour.
Sales of its Dove products, for example, have benefitted recently due to what it calls “microbiome-friendly innovations.” In layman’s terms, this refers to producing products that are kinder to the billions of natural microorganisms that live on the surface of the skin. Many see microbiome-friendly formulations as the future of skincare.
You don’t have to take my word on just how popular Unilever’s goods are all over the planet. Kantar Worldpanel’s Brand Footprint 2020 report perfectly illustrates the love affair global consumers have with its brands.
Of the world’s top 10 most chosen brands, the FTSE 100 firm can lay claim to three of them. Lifebuoy is the globe’s best-selling soap and sits in fifth place on the list. Sunsilk is perched in seventh position as the most popular haircare product. And its Dove stable of beauty products sits one place lower in eighth.
This sort of popularity means Unilever can lift prices on its products without suffering a meaningful dent in volumes too. It’s a quality that exists in both good and bad times.
Current City forecasts reflect the resilience of Unilever’s operations. Sure, the number-crunchers expect annual earnings to dip 2% in 2020. This is a reflection of the temporary impact that lockdown measures have had on consumer demand in the early part of the year. Indeed, the FTSE 100 share’s profits are predicted to rise 7% in 2021 on the back of its recession-proof suite of products.
Today, Unilever trades on a forward price-to-earnings (P/E) ratio of 18.5 times. Okay, it’s a little above the Footsie historical average. But it still reflects great value given its position as the ultimate ‘peace of mind’ stock. I’m thinking of buying more shares in the consumer goods goliath. Especially with a global recession almost upon us.
It’s ugly out there…
The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.
And with the Covid-19 virus now spread to over 200 countries worldwide, the bull market we’ve enjoyed over the past decade has finally come to an end.
Against such a backdrop of market worry, it’s little wonder that many investors feel panicked. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)
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Royston Wild owns shares of Unilever. 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.