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Stock of the week: Unilever

daniellelevy
Written By:
daniellelevy
Posted:
Updated:
10/12/2018

Helal Miah, investment research analyst at The Share Centre, picks Anglo-Dutch consumer goods giant Unilever as stock of the week.

This week’s share of the week is Unilever. The group has a long and distinguished history of growth and establishing many well-known global brands, including Magnum and PG Tips, relating to everyday items.

It has benefited from a concerted move into emerging markets, where its products appeal to the aspiring middle classes. Despite some negative headlines in recent times its scale, global reach and defensive nature remain attractive for investors.

Recent news that the chief executive Paul Polman will be stepping down at the end of the year to be replaced by the current head of the beauty and personal Care division Alan Jope should be a reassuring positive for investors as it should ensure a fairly quick and smooth transition.

The third quarter update in October showed sales growth recovering to 3.8% with good growth in Asia, though offset by disappointing sales in the Americas and Europe. The company said it was confident of achieving 3-5% underlying sales growth for the year and meeting its 2020 goals.

This month the group announced the purchase of GlaxoSmithKline’s Asian health food drinks businesses, which includes the Horlicks brand, for €3.3bn. This acquisition will provide further penetration into the emerging markets along with cost synergies.

The shares have continued to outperform the market and dividends are expected to raise well above inflation over the next couple of years.

We therefore recommend the company as a ‘buy’ for low to medium risk investors seeking a balance of growth and income due to the company’s diverse portfolio of global brands, renewed focus on boosting sales and good growth in emerging markets.


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