It’s been a pretty positive six months for the FTSE 100. As I write, the index hovers around 6,927.10 points, up almost a fifth (19.6%) since late October. The Footsie’s gains over this half-year came thanks to news in early November of highly effective Covid-19 vaccines.
These reports lit a fire under markets, sending global stock prices soaring. But not all FTSE 100 firms have seen their share prices leap since Halloween. For example, the Unilever (LSE: UVLR) share price has been a laggard and a loser.
The Unilever share price slides
The Unilever share price actually peaked more than a year and a half ago. On 3 September 2019, the shares hit an all-time closing high of 5,324p. They then declined for months, closing 2019 at 4,350.5p. But there was much worse to come.
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During March 2020’s Covid-19-inspired market crash, the Unilever share price slumped again. On 16 March 2020, ULVR shares hit their 2020 closing low of 3,726p. This was almost £16 below their September 2019 high. That’s a collapse of three-tenths (30%) in 18 months. Yikes. However, as Covid-19 infections slowed during last summer, the Unilever share price recovered. It rose to close at 4,892p on 14 October, rebounding by almost a third (31.3%) from its March meltdown. So far, so good.
ULVR shares disappoint in 2021
Alas, so far this year, the Unilever share price has been limping along. In 2021, it has ranged from a closing high of 4,467p on 6 January to a 2021 closing low of 3,733p on 26 February. As I write (late on Friday), the shares trade around 4,090p. That’s about £8 below their October peak. Yet this still values this Footsie heavyweight at around £108bn, making it one of the largest European companies.
Unilever is top of my watchlist
The decline of the Unilever share price brings to mind a quote from value investor Ben Graham. He said, “A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price”.
When I look at Unilever today, I see plenty to like. Unilever is a global Goliath in sales of fast-moving consumer goods (FMCG). It owns hundreds of household-name brands. Globally, 2.5bn people use Unilever products every day. That’s almost one in three people on the planet. It’s also run by an experienced and competent Anglo-Dutch management team.
For the record, ULVR stock isn’t exactly cheap, even after declining. With the Unilever share price at 4,090p, it trades on a price-to-earnings ratio of 22.5 and an earnings yield of 4.4%. The dividend yield is 3.6% a year, higher than that of the wider FTSE 100. Indeed, Unilever’s steady quarterly dividends are the mainstay of many an income portfolio worldwide. But this is a class act — and class doesn’t come cheap. Unilever has been a short-term loser, but I see it as a long-term winner. That’s why it’s top of my buy list today.
Then again, what if I’m wrong? I see two main impediments to a higher Unilever share price. The first is if the group fails to hit its target for sales growth of 3% to 5% for 2021. Unilever sales saw a stay-at-home boost in 2021 that may not last. Second, underlying operating profits fell 5.8% in 2020 to €9.4bn, due to extra costs — and might slip in 2021. Still, on balance, I’d be a buyer at today’s price!
