Is Unilever a buy, hold or sell?

Unilever PLC is one of those defensive income stocks that investors love to love.

In fact, investors love Unilever shares so much they’ve pushed the price up from £25 in 2015 to a recent high of £45.

Does this mean it’s too late to buy Unilever shares? Or if you already hold them, should you keep holding or does the price increase make this a good time to sell?

Unilever: A defensive growth stock in a world of frightening volatility

Investors love Unilever because it’s pretty much the closest thing you’ll find to a sure thing in the stock market.

It sells everyday branded consumer products like Domestos detergent, Dove soap and Magnum ice cream to millions of people around the world.

These items are priced at a premium relative to unbranded alternatives, and that premium ends up as profits on Unilever’s income statement and dividends in shareholders’ pockets.

Because these products are bought every day by millions of people, Unilever’s revenues, earnings and dividends have been very steady over many, many decades.

The company’s recent performance looks like this:

Unilever plc results
Slow but steady-ish progress for Unilever

As you can see, the general trend is upward, and while earnings declined for several years following the financial crisis, the normal state of affairs (i.e. earnings growth) has been resumed.

Cautious, defensive dividend investors just cannot get enough of this stuff, especially when the Unilever Fact Sheet says that Unilever’s dividend has increased by 8% per year since 1979!

And the latest annual report has this to say:

Over the last 5 years our dividends have increased 7% per annum and our share price is up by around 50%

The company also has other attractive features, including:

  • High profitability: High-margin branded products have given Unilever an average return on capital employed (ROCE) over the last decade of 15%, well above the market average of 10%.
  • Reasonable capex requirements: With no need to build retail stores or relatively little need to invest in factories and other equipment, Unilever’s capex-to-profit ratio has averaged an undemanding 44% over the last decade.
  • No excessively large acquisitions: Acquisitions can destabilise an otherwise stable business, but Unilever has not been overly aggressive with its acquisitions. Over the last ten years, total acquisitions came to just 23% of total profits.

In summary, Unilever appears to be a genuinely great company and up to this point, I’ve been unrelentingly positive about it.

However, it is possible to view Unilever through glasses which are decidedly less rose-tinted.

Unilever’s days as a growth stock could be over

You may have noticed in the chart above that Unilever’s revenues have more or less been static over the last few years.

And as I’ve already mentioned, earnings declined between 2010 and 2014, so Unilever is not quite the relentless growth machine that its almost mythical status might suggest.

In fact, when averaged across revenues, earnings and dividends, the company’s growth rate over the last decade has been just 3.5% per year.

But didn’t the annual report mention dividend growth at 7% per year?

Yes, it did. And over the period in the chart, Unilever’s dividend growth rate was a reasonably impressive 6% per year.

But earnings growth was a far less impressive 2.1% per year while revenue growth was hardly any better at 2.3% per year. And yet inflation over that period has averaged 3% per year.

So the unpalatable truth is that when inflation is taken into account, Unilever has not grown its revenues or earnings at all over the last decade.

This is not what I’d expect to see from an almost universally admired stock.

But the truth is that Unilever’s results may be even worse than that.

Without Brexit, Unilever has already gone ex-growth

In the chart above, Unilever’s revenues, earnings and dividends all made a healthy jump upwards between 2015 and 2016.

Is this a sign that the company is returning to its long (and distant) history of impressive growth?

No. It is mostly down to Brexit and the related fall in the value of the pound.

The value of the pound matters because Unilever generates most of its revenues overseas in currencies other than GBP.

As a result, when the value of the pound falls, Unilever’s revenues, earnings and dividends, in GBP-terms, become higher than they would otherwise have been.

So what would Unilever’s results look like in a Brexit-free world? One in which the value of the pound hadn’t collapsed in 2016 by around 15% relative to the Euro and other international currencies?

Unilever plc results ex-brexit
Without the currency-related boost from Brexit, Unilever’s growth is gradually fading away

With the Brexit boost removed (note the lack of a jump upwards in 2016), Unilever’s results over the last few years look even more anticlimactic than they did before.

Revenues have gone almost nowhere since 2010 and have in fact been falling since 2013.

The story for earnings is about the same, with a recovery since 2014 only just offsetting declines since 2010.

Only the dividend has continued to go up, with growth over the period of 5% per year. That’s not bad, but I don’t think it’s anything worth paying a premium for.

Another worrying trend is that the dividend has been growing faster than earnings or revenues. This is simply unsustainable.

In this Brexit-free world, revenues have grown by just 2% per year (on average) and earnings just 1.5%.

Since dividends must be covered by earnings in the long run, the dividend cannot keep going up at 5% per year (or 6% if we reinstate Brexit) if earnings are going up by 1% or 2%.

While this is going on, Unilever’s dividend cover is gradually being eroded. For example:

At the end of the previous decade, Unilever’s dividend cover was around 1.8. But over the last three years, it has averaged a measly 1.4.

If dividend growth keeps outstripping earnings growth then at some point the dividend will be uncovered.

This will starve the company of cash which it needs to invest for growth, putting further pressure on the company’s already lacklustre growth prospects.

The CEO may decide to ramp up debt levels as an easy way to pay an unsustainable dividend and invest for growth, but that is a very risky strategy.

Unless Unilever starts to turn things around then either a) the dividend growth rate will have to come down towards 1% or b) the risk of an unsustainable debt binge becomes a real possibility.

And that turnaround may never come.

Yes, people love brands, but an increasing number of people don’t care about branded goods, as long as they’re buying “own brand” products from a retailer they trust, e.g. the big supermarkets or Amazon.

Amazon (the destroyer of other people’s profits) is coming

Amazon, otherwise known as “The Everything Store”, is perhaps the biggest threat to companies like Unilever that rely on popular branded goods to deliver high-profit margins.

Amazon’s relentless expansion has taken it into the world of recurring deliveries, where you can buy Amazon Basics products (yes, “own brand” products from Amazon) that get delivered to your door every month.

Just imagine, you’ll soon be able to order soap, detergent and toothpaste (all things that Unilever profits mightily from) from Amazon and have it automatically delivered at a frequency of your choosing, all at incredibly competitive prices.

How can Unilever, or any of the other defensive consumer goods companies compete with that? I have no idea.

If you want to ponder this issue further, here are a few brief overviews from 1010DATA:

However, this doesn’t mean I think Unilever is about to declare bankruptcy.

What it does mean is that I think investors should be very wary of easy assumptions about Unilever’s ability to keep growing at all, let alone as quickly as it did several decades ago.

So given that I don’t expect Unilever to deliver double-digit or even high single-digit growth rates in the future, what do I think about its current share price?

Unilever has “expensive defensive” written all over it

It should not come as a surprise that I think Unilever is overvalued at its current price of £42.

The dividend yield is just 2.6% compared to a yield of 3.2% from a FTSE All-Share tracker.

And if you think that’s an unfair comparison because the market index grows its dividend more slowly than Unilever (therefore negating the benefits of a higher yield), you’d be wrong.

The All-Share has grown its dividend by 5.7% per year over the last decade while Unilever grew its dividend by 6% per year (not adjusting for Brexit).

So if we optimistically assume the same dividend growth rate going forwards then Unilever could return 2.6% from its yield and 6% from growth, giving a yield-plus-growth potential return of 8.6%.

But the FTSE All-share has a yield-plus-growth potential return of 8.9%, some 0.3% higher than Unilever’s.

Of course, investors won’t actually get exactly 8.6% or 8.9% per year from either investment, but the point is that Unilever at its current price is not obviously more attractive than a simple index tracker.

In fact, I think the tracker is probably more attractive because no matter how low-risk Unilever might be, it isn’t as low-risk as the diverse collection of 600 or so companies that make up the All-Share.

By now it should be clear that I wouldn’t buy Unilever at its current price. Instead, this is what I think:

  • I would definitely sell Unilever today because I think it’s just too expensive

Unilever’s share price needs to fall a long way for it to be attractive

I’ll finish with a target buy price, i.e. the price I would be willing to pay for Unilever. And yes, I would be willing to buy it at the right price, despite some of the negative things I’ve said.

Unilever currently has a rank of 165 on my stock screen of dividend-paying companies, out of a total of 220. Number 1 is the top rank, so Unilever is below average and pretty close to the bottom.

However, at a lower price, it would move up the screen and at some point it would enter the top 50, which is where I select new investments from.

So if everything stayed the same, i.e. revenues, earnings and dividends unchanged, but the share price fell far enough (and the yield rose high enough), then I would buy.

And here is that price:

  • TARGET PRICE: I would be willing to buy Unilever at anything below £23

At £23 Unilever would have a dividend yield of 4.7%, which I think is far more appropriate given its pedestrian 3.5% overall growth rate.

The PE ratio would be 14 and more importantly, the PE10 and PD10 ratios would be 18 and 28 respectively, which are both pretty close to the market average.

I think that valuation looks sensible given Unilever’s mature, ex-growth profile. It’s certainly far more sensible than the company’s current high growth valuation, at least in my opinion.

Of course, £23 is a long way below the current share price of £42, so I don’t expect Unilever to reach £23 until there are some problems.

Or failing that, until investors decide that companies selling consumer-branded goods are not necessarily worth their current elevated prices.

Author: John Kingham

I cover both the theory and practice of investing in high-quality UK dividend stocks for long-term income and growth.

31 thoughts on “Is Unilever a buy, hold or sell?”

  1. Interesting perspective and a decision to sell depends on your investing style. I think your approach is based on buying and selling as shares reach cheap or expensive valuations according to your judgement. Unfortunately it is not a skill I possess and dancing in and out of great companies because I thought I knew they were overvalued has really hurt my performance in the past.
    My investment approach is to take large-ish positions in high quality companies which have shown the long term ability to come through all sorts of market conditions and avoid too many decisions based on finding alternatives after selling which would do better than the best run companies with reliable ROCE.. Unilever is one such company and I am happy to stick with it. Quality companies don’t get obviously cheap and that is for a reason. Just for context in 2007, Unilever was yielding 2.6% and people were complaining about growth. if you had invested in it and held on through the crisis till today and reinvested dividends you’d have 4.5 times your money, crushing the FTSE total return. In that time it had just one year of negative shareholder return, a “mere” -13.8% in 2008 when most other stocks got creamed.
    Looking forward. If held through to 2027, I expect the total return from Unilever to be in the 10-12% range conservatively ( lower than historical ROCE) with high safety of principal and I am content to hold for the long term. I am more a total return investor and don’t look at dividend yield – I prefer companies that can reinvest at high rates internally rather than return capital.
    All in all , a matter of investment approach and opinion. Interesting to note Buffett was keen to buy into Unilever earlier this year when the likes of Woodford were dismissing it as an investment on valuation grounds..

    1. Hi Lemsip, lots of interesting points there, some I agree with and some I don’t. I think the most important thing you said is that that trying to buy low and sell high hasn’t worked for you in the past, so you’re probably right to stick with a buy and hold strategy.

      And you never know, you may get your hoped-for 10% to 12% over the next decade.

      As for Buffett and Woodford, I wouldn’t worry too much what either of them is doing as they’re both fallible (as we all are of course). After all, Buffett was busy buying Tesco shares from Woodford just before it fell off a cliff. And I’m no better because I did much the same, so at least I have that in common with Buffett.

      1. My returns since I switched to something like the Phil Fisher style – buy only quality companies after thorough analysis, commit in sizeable amounts and then sit on on your backside – have been much improved from my results before which involved a different process of making a number of buy/sell decisions based on value metrics.. One of the companies I committed to early ( around 2007) was indeed Unilever.
        Buy low sell high sounds easy and obvious to say but I found it hard to do consistently and perform better than average. It was easier to come with a system that worked for me to aim to minimise the amount of trading and in particular selling and switching activity I was undertaking. Results have been more than adequate ( 20% p.a over 3 years, 16% p.a over 6 and around low single digits through the last 2 bear cycles). Unilever is my third largest position in a non-trivially sized portfolio ( so preservation of capital is actually quite important) and after the recent investor day I am quite ok with the prospects looking forward all things considered.

  2. Very nice analysis. I am a buy and hold investor. UL is a solid consumer staples company. With it’s payout ratio of 52.22%, I would definitely buy it for my DGI portfolio. It’s P/E is still lower then the P/E of broader market.

    1. Hi dividendgeek, I think Unilever is very popular with buy and hold investors and probably rightly so. It does after all have a very long and steady history. But I’m not a buy and hold investor and I want to beat the market by a comfortable margin, so holding on at what appear to be lofty valuations is not for me, but that’s just my preference.

      As for its PE relative to the market, The FTSE 100’s PE is very high at the moment because earnings are depressed due to the major banking and commodity stocks having weak profits. However, the FTSE 100’s earnings have been recovering rapidly over the last few months so I expect the market PE to return to more normal levels quite soon, i.e. mid-teens or thereabouts.

  3. And let us not forget, no brand is necessarily forever.. Market preferences change, brands become tired, etc..

    What’s interesting about Amazon is that one tends to look at scores rather than brand name. Perhaps this is a whole new way that consumers are thinking.

    1. Quite possibly. I’m sure there will always be a small core of people who care about the brand of their soap or detergent, but once everyone is buying everything through Amazon (which is the way things are going) and getting them automatically re-ordered and delivered on a regular basis, then I think more and more people will just go with the Amazon brand as it’s the default no-brainer option.

      Fashion brands might hang around for longer, but not detergent (IMHO).

    2. “””And let us not forget, no brand is necessarily forever.. Market preferences change, brands become tired, etc..”””

      Forever is a long time, but these are the timescales of just a few the current Unilever brands :-
      Dove — launched in 1955 — 62 years
      Surf — launched in 1952 — 65 years
      Lipton — launched in 1890 — 127 years ago
      Persil — launched in 1907 — 110 years ago
      Domestos — launched in 1922 — 88 years old
      Walls — launched in 1929 — 95 years old
      Knorr — launched in 1838 — 179 years old

      I could go on but the list of dominant brands is endless — it’s almost an irreplaceable list of massive value.
      I would say at £42 — and given the very high ROCE that Unilever generates over time, the value could be completely understated. This is also the view of Nick Train and others who don’t chop and change shares every two minutes, like the Woodford’s of this world.

      also look on page 62 of this WPP “analyst” presentation to see the real power of brands and the superior returns they have given for a looong time.

      To say that brands are no longer relevant is I think a misunderstanding of their true value. I think this is clearly illustrated by the many mistakes made by selling Reckitt Benkinser over time, only to look back and regret it.

      Or consider this :-
      If you put $10,000 into Procter & Gamble in the summer of 1970, you’d have $1,750,000 today.

      Amazon is a disrupter in many respects, but it also sells so many branded products through their media.
      The generics of the consumer world (or unbranded products or supermarket own brand labelled products) have been proven over 40 years of measurement, only to affect the sales of branded products by a few % (3% at most).


      1. Reckitt Benckiser is possibly also worth a review. I think its valuation isn’t bad, and not as bad as Unilever’s, but it also hasn’t grown particularly quickly this past decade. Overall growth has been around 5% per year and with a 2.2% yield I don’t have high hopes for future returns.

        Having said that, I am more like Woodford in that I jump in and out every few years, rather than holding “forever”. For example, I bought RB in 2011 and sold in 2013 for a 23% annualised return, then bought again in 2014 and sold in 2016 for a 24% annualised return. The underlying company didn’t grow anything like that quickly, so in those cases “jumping” in and out worked (I say “jumping” because buying or selling every couple of years is not exactly high-frequency trading).

        But of course lots of people like buy-and-hold investing and it’s an entirely reasonable way to invest in quality companies. Horses for courses, swings and roundabouts, apples and oranges, etc.

  4. These were the reasons I sold RB. far too early.
    I never predicted that “expensive defensive” would go so far!
    As well as the Amazon threat, a return to a conventional interest rate environment poses a threat.
    I also wonder how the healthcare brands will fare and whether there is a threat to GSK from Amazon.
    I agree about fashion and cannot see how Amazon will ever compete with the likes of BOO.

    Thanks for the articles.

    1. Hi Apad, yes the “bond proxies” have gone very, very, very far indeed. But the higher they go, the riskier they become.

      As for GSK, there’s a lot of crossover between their health/wellness etc. products. I would expect people to be pickier about what they put in their mouth (i.e. tablets, food) than they are about what they clean their socks with, so I’d expect brands to have more strength and longevity, but I really don’t know and certainly haven’t done any serious research into it. And even if Amazon does do something it will takes years to scale up.

      I see this as more of an issue for Unilever because of its high valuation (in my opinion), whereas GSK is reasonably cheap (in my opinion and as long as it doesn’t cut the dividend).

      And I should disclose that I own shares in GSK and it’s in the UK Value Investor model portfolio.

  5. Thanks John for a thoughtful resume.
    The conclusion OK’ish buy at lower price seems sensible.
    Lemsip said :-
    “Just for context in 2007, Unilever was yielding 2.6% and people were complaining about growth. if you had invested in it and held on through the crisis till today and reinvested dividends you’d have 4.5 times your money, crushing the FTSE total return”
    This really makes the point that Unilever, I.E. the share price, has startingly outperformed since mid 2015, so might now be due for a period of relative underperformance, to bring the valuation measures back to longer term medians. However much the same can be said for quite a few other stocks today! So not in itself a deeply revealing observation!
    For dedicated Unilever investors who feel naked without Unilever in their portfolios, maybe just reduce somewhat by creaming off some profits?

    1. Hi Magneto, yes the massive gains post-crisis are exactly what I’m talking about. They basically front-loaded about 20 years of capital gains into the first decade, so I see no fundamental reason to expect any gains in decade two (2017-2027).

      As for what Unilever-lovers should do, I have no idea! I make a deliberate point to not fall in love with any of my investments. I’ve been burned often enough and don’t want to go through that emotional roller-coaster again (I sound like a divorce counsellor).

      1. Just to address this, if I found something that was a clearly better prospect then i would reduce Unilever to buy it of course. However, one of the characteristics of buy and hold investing that requires discipline is guarding against the next shiny thing syndrome where you constantly see things that look better than what you own. Real money is made over decades and sticking with quality companies ( as I have been fortunate enough to experience with Unilever even with a historic meltdown thrown in). I do accept that it is a mistake to fall in love with a stock but the bigger mistake for me has always been to switch away from quality companies i thought were overvalued to inferior businesses that looked cheap, only to learn they were cheap for a reason when the tide turned.

      2. Good point.
        The only stocks looking cheap currently, are seemingly cheap for good reasons!
        So much care needed if looking for alternative stocks.
        Frying Pan and Fires?

        Leaves us today with a heavy weight in defensives (Cash, Bonds & Fixed Income Alternatives).
        Diffficult times for ‘stock pickers’.

  6. “”The All-Share has grown its dividend by 5.7% per year over the last decade while Unilever grew its dividend by 6% per year (not adjusting for Brexit).””

    John, You also have to factor in the Brexit effect for the index as well, since many are also foreign earners.

    I’m also interested in your expectation that GSK is cheap — I think it’s incredibly expensive for the value it’s destroyed over the last 5 years with a margin erosion from 27%+ to 9% and a debt that looks rather ominous.
    I sold GSK at 1722 and think myself fortunate to have got out.
    GSK, like most big pharma have a major dilemma in that the cost of drug development has jumped from 10’s of millions to 100’s of millions, whilst trying to identify drugs that are no longer broadly enough applied to be called blockbuster – hence they have to recoup the cost with higher prices — these are not sustainable with squeezed NHS and other health budgets around the world.

    Another thing to think about is that realistically Warren Buffet (fallible or not) was probably prepared to pay up to £50 a share for Unilever had the negotiations been allowed to continue.

    If you want a cheap stock, it might be worth a gander at WPP right now. WPP has a 4.7% yield twice covered and more than covered by cash flow – in fact cash flow has also been used for extensive buy back and selective growth enhancing acquisitions. Be interesting to see the stock screen position of WPP at the moment John.


    1. You also have to factor in the Brexit effect for the index as well, since many are also foreign earners.

      I agree, but it’s much more difficult to do for the index. For Unilever it’s easy as it’s results are published in Euros, so you can just reverse out the exchange rate change, but what about the All-Share? So I did think about this, but decided just to leave it. Also, whether the All-Share is Brexit-adjusted or not has no impact on my basic point that Unilever has not grown for many years, contrary to popular belief/expectation.

      I’m also interested in your expectation that GSK is cheap

      This is where we get lost in semantics! I try not to “think” or “expect” anything about the future. I have no clue what GSK shares will do, but they’re listed reasonably high up on my stock screen which suggests to me that they are possibly cheap. Plus, I’ve done a more detailed analysis and everything looked reasonably okay, except for the debts, and of course that a positive analysis is no guarantee of success.

      And it’s not all sunshine and roses. GSK’s growth is negative over the last decade, consistency is terrible and the debts are a serious problem. But on balance I’m still happy to hold it, but debt reduction should be a priority.

      WPP: It’s very high up on the screen, but I haven’t looked at it at all so I don’t know what lurks beneath the covers.

    1. Thanks. I might do a review of Reckitts soon because it keeps coming up as another example of the popular consumer staple stocks. I haven’t looked at it for a few years (I think) so now might be a good time.

      1. The first time I had a thorough look at Reckitt it traded at 3’200 GBX but due to “thumb sucking” as Warren Buffett might put it I didn’t buy although everything (including the valuation) looked perfect. I then bought at a far higher price (4’800 GBX), when the Swiss National Bank abolished its 1.20 fix to the EUR, which produced a temporary 15% discount off GBP investments for CHF Investors.

        At current valuations (P/E 26.8 & P/B 5.8) I think Reckitt might be overvalued. One candidate, although not cheap either, may be Henkel (P/E 21.6 & P/B 3.2). As P/E and P/B are just very preliminary indicators I’ll have to run a thorough analysis first. What I like about Henkel is the Henkel Family ownership, which seems to be encouraging a long term strategy.

      2. I sort of agree that Reckitt’s is probably overvalued. My stock screen says not, but that’s affected by the company’s high historic growth rate, which is hasn’t managed to achieve in the last few years. As the older higher growth years drop out of the calculation I expect Reckitt’s to look gradually less attractive at today’s price.

  7. No mention of the recent Heinz bid? I reckon the ULVR premium valuation is partly attributable to that at present.

    1. Hi Joe, that’s a good point. The price before the Heinz offer was about £33, after which it went as high as £45 and now sits at £42. I guess investors feel that even though the offer was abandoned, either 1) Heinz will make another bid or 2) Unilever will up its game, therefore justifying a higher price.

      However, both points 1 and 2 above are highly speculative, which is why I didn’t mention them in the article, although perhaps I should have. My opinion is that neither is obviously likely to happen, and therefore Unilever’s high valuation is probably unjustified.

  8. O000h this is an interesting debate — you’ve hit a good topic here John, because the “Unilever effect”, for want of a better term, does seem to be so similar in a few stocks across the board, both here in the UK and across the pond.

    A couple of points to add about the valuations :-
    “”The dividend yield is just 2.6% compared to a yield of 3.2% from a FTSE All-Share tracker.””

    Unilever’s dividend yield currently sits at 3%, not 2.6%
    This is based on a a current annual payment of 125.5p and a share price of 4200
    If you look at the projections for next year, it’s 3.2% which is inline with or higher than the index, if you allow for a similar downgrading of the index due to a fair and similar currency downshift. – So do you hold the index, with a load of flakey commodity and bank stocks, or Unilever? (consults crystal ball for advice on the topic).

    In any respect, any future adjustments in currency will equally (or should or could) affect the index and the valuation of ULVR shares.

    Now look at the P/E — for this year it’s 21,4 but the earnings growth is a healthy 20% so the PEG factor (yes it’s in isolation and not a 10 years measurement) it’s at 1 so quite conservative.
    Into next year a finger in the air says that the earnings growth will halve and the P/E will be down at 19 so on a transitory basis it might look a little expensive — however that’s assuming you value companies purely on P/E’s – PEGS and averaged over time growth rates.

    Perhaps the sale of one of the divisions (spreads) for £6BN might give a better understanding of the true value of Unilever.
    This could be done by allocating the revenue and profit % of Unilever to the spreads business (difficult to do given the components in spreads are not clearly identified) but then you are probably looking at upwards of £80 to £100 a share maybe? — I realise this is a little academic, but it does illustrate a different view on the valuation that can be applied to these companies.

    Who’s right, who’s wrong is a moot point, but then again Mr Market never seems to get it right does he or we’d all be living off the divis.

    LR – Who became a WPP shareholder on the big dip this morning and is also owning up to the fact that Unilever is (quick check) 3.74% of his wad and 60% up on the buy price — finger hovering over the red and green buttons !!

    1. “do you hold the index, with a load of flakey commodity and bank stocks, or Unilever?”

      If it was a choice between putting 100% of my money in either Unilever or the FTSE All-Share I’d choose the All-Share every time. The risks are just to great with a single company in my opinion, no matter what company it is.

      As for WPP, perhaps I’ll join you if the share price stays where it is. But first I have to sell something this month…

      1. John, Put like that, I’d agree and I’m not ever confident in holding just one stock lol !!
        Like you, I see too many good ones out there and there are always good entry points as you point out – maybe Unilever at 3.74% of my wad is too much — so far it’s served me well.

        WPP looks so impressive over the last 30 years, and sadly I’ve not been a shareholder of, but that’s history isn’t it?
        I’m hoping that the drop from 1920 to 1300 is just too much negativity. I think it is, so I’ve started it at just under 1%. I sold half of Burberry at what looks like a great gain at 72% in 15 months and I’m nervous about the departure of Christopher Bailey. Still the brand is older than me and you, so I’ll probably keep the remaining 2.39% of my portfolio and see what gives. I’m waiting for the rain so I can go out in my new Trench Coat.


  9. I can only agree with John, future for Unilever is not great. I used to hold 3% of my portfolio, but now I am down to 1%. To compare that I have 7% in Amazon stock.

    Your portfolio should move following companies with good growth prospects and good allocation of capital. Unilever does not have any of these qualities, the M&A approach my Kraft Heinz may have waken up the CEO, but so far I haven’t heard great things.

    I would prefer that Uniliver gears itself up and makes some acquisitions in China where the demand for quality food at a premium is very high.

  10. John -OK – sold the lot yesterday at 42XX and it’s already dropping like a stone – down 2.19% today alone.
    My reasons for selling are somewhat in agreement with some of your points about low growth, dividends outpacing the real growth etc.

    However, the fundamental reason is the management – it’s doing the wrong things, whilst dressing it all up as “simplification” — effectively delisting from the UK after what, 100 years. No they are not delisting, but from the FTSE100 yes and that matters.
    If I were CEO of Unilever, or any large conglomerate like it. I’d be very wary of not having a main listing in the FTSE100.
    The real reasons for the move of the HQ to The Netherlands is protectionism, and that’s never a good thing for shareholders.
    One of the benefits of capitalism is the fact that if you can’t grow a good company profitably then someone else will come along and do it for you. Polman is effectively blocking this and working with Mark Rutte (Dutch priminister and ex Unilever manager) to ensure Polman’s legacy on leaving and helping Rutte look like a business champion in bringing the corporation to the Netherlands.

    The bid premium will go because of this protectionist move, the currency benefit will fade and the index funds will all have to sell putting further downward pressure on the shares.
    I doubt £23 or the new share equivalent will be visited anytime soon, but the attractions of owning Unilever seem to be drifting.
    I get the issue about own brand and Amazon and it is a threat – I see the price differences of own brand and they are considerable and attractive to many young families. On another front, I thought the $bn paid for $ shave was execessive and somewhat late, in that all the competition are already now also offering monthly shave subscription services.

    It was almost 4.5% of my wad – where to next he wonders?
    Well some of it may go to the Smithson Launch – I’m not a fund junky, but the breadth of the small company approach in the US and Europe, Japan is too broad for me to replicate and too expensive to buy and hold individually, I do believe Smith can do a good job here, and whilst I loathe paying the 0.9% fee, in this case I make it an exception.

    Onward and upward — I suppose having also dumped Diageo I’m wondering what would be a reasonable reentry price — it still looks overly expensive right now.


    1. Hi LR, I think it’s a shame that Unilever is leaving the FTSE 100 as it’s a nice big defensive company and something I might have invested in at the right price.

      I don’t own stocks outside the FTSE All-Share (FTSE 100/250/small-cap) but I think if I did own Unilever I’d make a special case and hang on to it for now. However, not being in the All-Share is definitely a negative point from my UK-centric point of view.

      But such is life. Unilever’s future lies elsewhere and so I wish it good luck (it will need it if the Amazon juggernaut can stay on the right side of regulators and continue expanding its own-brand products)…

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