Why Unilever plc and Reckitt Benckiser Group plc are for life – not just for Brexit

This Fool thinks Unilever plc (LON ULVR) and Reckitt Benckiser Group plc (LON RB) are sound investments for the long term.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Unilever sign

Image: Unilever. Fair use.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If the UK votes to leave the EU on 23 June, London’s benchmark FTSE 100 index could be nursing a hefty 10% loss over the next 12 months, with certain sectors such as housebuilders and other cyclical sectors suffering greater losses according to UBS Wealth Management.

Adopt the brace position 

The view of the wealth manager suggests that the performance of London-listed companies is dependent on the outcome of the impending referendum. A vote to leave the EU could send the market crashing, while a remain vote could mean that the blue chip index could surge by 5% giving a 15% variance – a material amount.

In addition, it has been suggested that the pound could plunge to a low of 1.25 against the dollar on the event of a Brexit. These are lows that haven’t been seen for some time, though this would obviously boost earnings for those companies that conduct a meaningful part of their business overseas.

My personal view is simply that the market will remain volatile. As we’ve seen during this shorter week of trading, Mr market has been spooked by the re-emergence of the possibility that the UK voting public will actually vote to leave the single market. If there’s one thing that the market hates – it’s uncertainty. We witnessed this in spades during the build-up to last year’s General Election with housebuilders and some utilities seeing their share prices suffer owing to differing political policies, only to rally strongly when it became clear that there was an outright winner.

Buy defensive or buy for growth?

I’d be among the first to encourage fellow investors to adopt a balanced approach to their investing, with a portfolio consisting of both growth shares and stocks considered to be more defensive such as Unilever (LSE: ULVR) and Reckitt Benckiser (LSE: RB).

And while it can be foolish to shift your entire portfolio into more defensive shares during uncertain times such as these, there is, in my view a case to simply include these low volatility or low beta stocks as a mainstay of your portfolio, whatever the weather.

Indeed, turning to the 10-year chart below, which tracks the share price performance of both Unilever and Reckitt Benckiser against the blue chip index, we can clearly see that these boring shares have left the market for dust.

Getting rich slowly

And if the market-trouncing outperformance isn’t enough – just think of the dividends that have been paid to holders of these shares through both good times and the more difficult years. These dividends can sometimes mean the difference between positive and negative returns, especially in more difficult market conditions such as we’re seeing now.

Unfortunately, many novice investors will often hold a concentrated portfolio, usually compounded further by concentrating on a certain sector (usually the oil exploration and mining sectors).

Often this is folly and leads to either average or poor performance against the market, and as we can see from the chart, the FTSE 100 (excluding dividends) has essentially been flat over the last 10 years, which means that many will have suffered significant losses.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dave Sullivan has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »

Investing Articles

Are Rolls-Royce shares undervalued heading into 2025?

As the new year approaches, Rolls-Royce shares are the top holding of a US fund recommended by Warren Buffett. But…

Read more »

Investing Articles

£20k in a high-interest savings account? It could be earning more passive income in stocks

Millions of us want a passive income, but a high-interest savings account might not be the best way to do…

Read more »

Investing Articles

3 tried and tested ways to earn passive income in 2025

Our writer examines the latest market trends and economic forecasts to uncover three great ways to earn passive income in…

Read more »

Investing Articles

Here’s what £10k invested in the FTSE 100 at the start of 2024 would be worth today

Last week's dip gives the wrong impression of the FTSE 100, which has had a pretty solid year once dividends…

Read more »

Investing Articles

UK REITs: a once-in-a-decade passive income opportunity?

As dividend yields hit 10-year highs, Stephen Wright thinks real estate investment trusts could be a great place to consider…

Read more »