On 7 June last year I invested £2,000 in Unilever (LSE: ULVR) shares, with plans to build up my position over time.
Around the same time, I also invested £2k into FTSE 100 shares 3i Group, Legal & General Group, M&G, and Smurfit Kappa Group. I’ve since bought more of all of them, with the exception Unilever. I haven’t been tempted to add to my 49 shares.
For years, Unilever was a no-brainer buy. It boasted more than a billion customers in around 190 countries. As the emerging markets middle class got richer, they’d spend more and more money on Unilever’s 400 brands like Lifebuoy, Dove, Axe and Sunsilk. Today, it’s more of a Marmite stock.
Some like it, some don’t
Nothing lasts forever, especially when it comes to investing. As earnings slowed, Unilever drew the attentions of billionaire activist investor Nelson Peltz, who wanted to break up the company’s sprawling operations to release value. Initially unwelcome, now he’s a non-executive director.
The board then botched the acquisition of GSK’s consumer healthcare division, ran into controversies over its environmental, social, and governance (ESG) strategy, and was derided by Terry Smith at Fundsmith Equity, who blasted the board’s long-term performance and “penchant for corporate gobbledegook”.
Unilever also suffered as the emerging markets growth story didn’t have the happy ending we all expected. Its share price stopped climbing, then fell. Enter me.
For years, Unilever traded at just shy of 25 times earnings. I bought it at 17 times. Bargain! The yield used to hover around the 2% mark. I bought at almost 4%. It looked a classic case of buying a good company on bad news. All I had do to was wait.
I’ve only held the stock for nine months, but it feels longer. Within weeks the share price dropped around 10%, and refused to budge. Over 12 months, it’s down 17%.
There was a flurry of excitement last week, when the Unilever share price briefly stirred into life.
Slow road to recovery
Investors soon lost heart after Morgan Stanley deemed the rally exaggerated, citing the company’s low earnings-to-cash conversion rate and high emerging markets exposure. Today, I’m down around 3.83%. Or around £75, which isn’t much but then I didn’t buy much (luckily).
Full-year 2023 results, published on 2 February, contained positives including free cash flow climbing €1.9bn to €7.1bn, and a new €1.5bn share buyback from Q2. Management also admitted to its faults, with CEO Hein Schumacher confessing that “competitiveness remains disappointing and overall performance needs to improve”.
Sod’s law suggests that if I sell Unilever its shares will fly and in any case, I waited too long to buy them to sell so soon. More patience required.
I made one rookie error when buying Unilever. I automatically reinvest all of my dividends, but my first payout of £18.20 on 8 December was too pitifully small to reinvest, with the stock trading around £38 at the time. So I’ll double down and invest another £2k to make future dividends reinvestable. If I’m going to hold Unilever for the longer run, I might as well do it properly.
The post I bought 49 Unilever shares in June. Here’s what they’re worth today appeared first on The Motley Fool UK.
Pound coins for sale — 51 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Harvey Jones has positions in 3i Group Plc, Legal & General Group Plc, M&g Plc, Smurfit Kappa Group Plc, and Unilever Plc. The Motley Fool UK has recommended M&g Plc and Unilever Plc. 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.
