Image source: Unilever plc
Unilever (LSE: ULVR) were the spoilsports of my portfolio in 2023. Now I'm thinking about giving them the elbow, but is it wise?
I had a lot of fun in the second half of 2023 shopping FTSE 100 shares for my new self-invested personal pension (SIPP). Having consolidated three legacy workplace and stakeholder pensions, I had a good amount of cash at my disposal and I put it to good use.
I bought 10 different FTSE 100 shares and they are all now in positive territory, with Group 3i and Taylor Wimpey up to around 20%. Unilever is the only negative. It is down 6.6% since I spent £2,000 buying 49 shares on June 6, at a price of 4,038p. Today they are worth 3,800 pence.
My only notable failure
My initial £2,000 was to test the water. I had planned to refill it, as I did with almost all of my other purchases. I buy Legal and General Group on three occasions, for example. However, I couldn't lower Unilever's average. Now I'm wondering if I should get rid of the one loser in my portfolio and put the money into one of its many winners.
But aren't we supposed to do the opposite this time of year? Many advisors suggest rebalancing portfolios annually, selling winners and buying losers. Investment is cyclical. Sell high, buy low, etc.
Ultimately, it all comes down to actions. Unilever was a successful performer in the FTSE 100 for years, and I spent years waiting to buy it on the cheap. I finally got my chance last year, when the valuation fell below 18 times earnings after years trading above 24 times. Today it is valued at 17.05 times.
The stock has struggled for years. They have fallen 6.86% in five years and 9.57% in 12 months. They even missed the November and December rally. I'm not the only investor who is cautious.
New chief executive Hein Schumacher admits Unilever has failed to match its potential. He plans to push “growth, productivity and profitability” focusing on the development of its 30 most important brands, which represent around 70% of its turnover.
A long way to go
Sales continue to fall, 3.8% in the third quarter to 15.2 billion euros. Unilever has more than 400 brands but are they too many? It's been a long time since I bought Bovril, Knorr, Lifebuoy either Vienna. It's nice to have some old reliables, but where are the cool new producers?
The new Schumacher broom has been compared to Tufan Erginbilgiç in Rolls-Royce. Both quickly identified serious problems in their new positions. So far, only Erginbilgiç has taken radical measures.
I also wonder if Unilever's food brands might find themselves at the forefront of resolving the dietary coup. Willpower Ozempic and other appetite suppressing medications affect the demand for Hellmann's and ice cream brands Ben & Jerry's, Cornetto, Magnum and Walls? Time will tell.
When I buy stocks, my goal is to hold them for at least five to ten years. I'll stick with Unilever for now, but I won't lower the average. Investing is cyclical, as I said, but Schumacher needs to work harder to get sentiment back in favor of stocks.
