MR MONEY MAKER: These household brands will help you to clean up, says JUSTIN URQUHART STEWART
I have found over the years that markets can be at their most dangerous when confidence morphs into a form of complacency.
Indicators of this are usually related to young excitable investors being drawn into having a flutter on the ‘stock du jour’ or the punting lunacy that is Bitcoin.
Unilever is a company with which we will all have some connection, from consuming their products such as Magnum, Marmite and margarine
Welcome to the investment world of Spacs, Spavs and Spivs, all boosted by the hearsay and tittle-tattle of social media.
So it is important to try to find those long-term ‘must holds’ in your investment portfolio.
Why Does It Matter?
I have in the past often cited the greatest strength that we all can apply to our portfolio: the power of compounding, or to be clear, the long-term effect of dividend and income reinvestment.
There are two key issues here. The first is finding these investment nuggets, and the second is to still be around to benefit from this compounding.
That is why I am a keen enthusiast for providing investment incentives for babes in arms to invest for the really long term – and I do not mean junior ISAs, which are likely to be blown away shortly after their 18th birthday.
What Should I Do?
Here is one such nugget which is most certainly on my essential list and that is Unilever.
This Anglo-Dutch business is one with which we will all have some connection, from consuming their products such as Magnum, Marmite and margarine, through to your pension pot, where it will almost certainly be present.
This business is global, and has some products such as Dove deodorant which we would regard as essential for normal living – irrespective of pandemics and political stupidity.
If you are thinking defensively, then its assets and brands are a great strength and value, so any potential bidder or aggressive hedge fund could see these as being extraordinarily valuable.
Also, as a dividend distributor, it has managed to increase its payout for the past 50 years, which I think is a remarkable feat.
The share price has come back by about 5 per cent over the past year but outperformed the index over the past five years.
So with a current yield of 3.4 per cent, I don’t think you would be overpaying for this stock at today’s price, which is well off its highs in 2019.
Buying Unilever means you are already obtaining a well-diversified portfolio of brands, with equally well-diversified global demand. There are similar businesses with the same profile, but not quite of the same class.
Reckitt Benckiser – maker of Cillit Bang cleaner and Dettol disinfectant – would be another one.
However, for a broader view of the sector then a fund such as iShares STOXX Europe Retail UCITS ETF should help you sleep well.