Let me just say this right off the bat: the investment would have almost doubled. And I haven’t even counted the dividend yield. I write this as panic sets in about this FTSE 100 consumer goods giant’s share price, making it the best time ever to invest in it. Put it this way: Unilever (LSE: ULVR) just played Santa Claus, delivering a Christmas gift, if we should choose to unwrap it.
Its share price tumbled by 7% over the previous close mid-week, a decline so sharp it hasn’t been seen in over a decade! The reason? It warned of slower sales growth in the next year driven by a slowdown in its markets.
The initial share price reaction is so steep, I reckon it will resume speedy upward movement soon enough; it has already started inching up. And for this reason, before going any further into this piece, let me just say this again, there couldn’t be a better time to tick ULVR off our investing wish-list, never mind the sales warning. Here’s why.
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What has Unilever said, exactly? And, what does it even mean?
Its latest sales update it says that it expects a “slight miss to our full year underlying sales growth delivery”. Cut to October, when it released its third-quarter results. It had said “For the full year, we continue to expect underlying sales growth to be in the lower half of our multi-year 3%–5% range”.
Essentially, this means that the already expected slowdown will be “slightly” more than earlier envisaged. If you ask me, it doesn’t sound alarming in the least, just a bit disappointing. With growth for three-quarters of the year already in the lower-half of the 3%–5% range, ULVR is just bracing us for a particularly poor fourth quarter, and nothing more.
What’s next?
In fact, it expects 2020 to be better, with growth expectation “to be in the lower half of the multi-year range”. In other words, it’s back to the same expectations set out for this year in October. Unilever does expect growth to be better in the second half of next year compared to the first half. So we can expect three quarters’ results showing some sluggishness in growth.
What should the investor do now?
I’ve long been bullish on ULVR and even after a fall in its price, it is still ahead of its levels seen last year. On average, the stock has increased investor capital by double digits in four of the last five years.
And if I had invested in the stock five years ago, as I was saying earlier, I would be sitting pretty on almost double the capital I put in. It’s a dependable share, a large multi-national, and has a history of performance. It’s a great share to buy for the long term, and right away.
