Unilever Live Discussion

Uncle_Doug 22 Dec 2019

Missing targets NewBill1703: I suspect there is more chance of £40 than your £50 on a 2-year timeframe. I would expect both £40 and £50 to be hit over two years. I hold RB, DGE, VOD, RR and many other big names - DGE and RB up slightly but VOD and RR got a way to go. You still keen on MKS and IMB?

NewBill1703 22 Dec 2019

Missing targets Uncle_Doug: Good to hear from you again Bill. I bought in @4640 and will get tranche 2 @4160 and then tranche 3 @3910, etc. I will keep buying all the way down to £32… I’m confident £50 will be seen sometime in next 2 years. Yes, Doug, £46 certainly a better starting point than £53 - and as I have said before on these pages, I would like to own ULVR, but I am not going to buy anything at any more than “fair value”. Of course, my “fair value” could simply be wrong - I’ve been wrong before, on a regular basis! I missed it at £30/31 in early 2016 when I was looking at it with serious interest - as indeed was Uncle Warren, as soon became clear. I would certainly need sub-£40 to be tempted as things stand - maybe it will never get there, in which case I will have to fish elsewhere, though I suspect there is more chance of £40 than your £50 on a 2-year timeframe. Further out than that, of course, is likely a different matter. It is interesting (to me anyway!) how the ratings of the Big 3 International Consumer Champs have diverged - for a while (eg. last year?) they were all trading on c.21-22x forward earnings. Diageo is off its highs but still at an extended 23x fwd P/E, Unilever got to a similar level but back around 21x now, while Reckitts is down to c.18.5x - and as such, much more in line with the long-term mean. RB earnings look to be going nowhere for the next year or so (if anything, down a bit?) but is probably no worse than a HOLD now - ULVR and DGE remain SELLs for me still.

Uncle_Doug 22 Dec 2019

Missing targets Good to hear from you again Bill. I bought in @4640 and will get tranche 2 @4160 and then tranche 3 @3910, etc. I will keep buying all the way down to £32. If it goes up then I’ll bail any tranches on 8% gain. All numbers approximate. I’m confident £50 will be seen sometime in next 2 years.

NewBill1703 22 Dec 2019

Missing targets Uncle_Doug: I remember back in 2017 Bill1703 saying £35 fair value, maybe you agreed too back then. I doubted him then and I’m glad I ignored him because I’ve done well since then on ULVR trades. I notice in the past 2 years it never got to that desired £35 entry point … but did get to £53. Anyway, at £35 (which I doubt we’ll ever see) Kraft and Buffet will come sniffing again and the SP will shoot back up. Ah, looks like all those years trying to train old Games are beginning to bear fruit! I never saw any reason to go back on my £35 “fair value” - at that time. Equally, I fully understood why the big “quality” overseas earners like ULVR (and DGE, RB, etc) have traded at a significant premium to “fair value” for most of the past 3.5 years, with a depressed GBP and a prolonged shadow cast over all UK-focused assets with (mostly) Brexit related economic uncertainty. But in recent times, these factors have begun to reverse - as they always were going to do. Hence the ULVR decline, even before this week’s “warning”, from c£53 to £45/46. But at that level, as Games rightly points out, it still ain’t cheap - a P/E around 21x, against a long-term “mean” of more like 18.5x, and with actual near term growth prospects looking more modest than they have for a long time. And don’t forget, the “E” is still benefitting from a GBP level which has, partial recovery notwithstanding, is still at comparatively depressed levels - if we see GBP recover (as I think we will) back to 1.45/1.50 at least over the next couple of years, ULVR could be “reporting” earnings (and cash flows and dividends, etc) actually lower than where they have been lately, several years from now! We are 2+ years on from 2017, and “fair value” will have moved up accordingly - but on next year forecasts (ie. FY 2020) it is still trading on 20x (and those forecasts are more likely to get revised down than up, on FX at least. Too high for me, on any sustainable basis - something nearer the long-term “mean” of 18.5x, and thus a SP of £39/40, would be about right today. FWIW I agree with Doug, I think you will see £50 again here - it is merely a case of “don’t know where, don’t know when”. Could be some years away - fine for all genuinely long-term investors, but not a prospect I find compelling right now at above £43.

Uncle_Doug 17 Dec 2019

Missing targets Gamesinvestor1: At today’s 7.16% drop you are likely to get a recovery bounce tomorrow, but I wouldn’t be surprised if this doesn’t find its way all the way back to a P/E of around 15 by the time the 2nd and third profit warnings come in 2020 – which I’m roughly calculating at 3500. At that point it would offer a 4%+ yield on a virtually no growth stock seems a reasonable return. I remember back in 2017 Bill1703 saying £35 fair value, maybe you agreed too back then. I doubted him then and I’m glad I ignored him because I’ve done well since then on ULVR trades. I notice in the past 2 years it never got to that desired £35 entry point … but did get to £53. Anyway, at £35 (which I doubt we’ll ever see) Kraft and Buffet will come sniffing again and the SP will shoot back up. I like your 2nd and 3rd profit warnings prediction - I was thinking along the same lines which is why I’m not buying right now - I will just add a 2nd and 3rd tranche. As I said before, needs to drop a bit more for me to get some more but I’m confident I will see a healthy profit in time. I don’t care about short term movements and blips - I have my targets and my buy points and I’ll stick to them. In fact I like the odd p/w as it means I can pick up more on the cheap. ULVR has always served me well and I’m sure this will continue. Growth will come as India and China (and I) get richer. By the way, Heinz does not really operate in the same market segments nor does it have the superior diversified brands and worldwide exposure of Unilever.

Uncle_Doug 17 Dec 2019

Missing targets I’m aware of the risks but every day one third of the world uses a ULVR product. The high P/E is indeed a worry and I must admit I didn’t know about your debt growth of 300%. The geographical diversity offers some useful protection as does their pricing power. I really like that they’re big players in growing economies and huge populations of India and China. I also think they can always offload certain brands at premium prices if they need more cash as they did with “spreads” a while back. Maybe I’ve been lucky, but I’ve always managed to stock up on downtrends and ride it up then bail at a higher price, usually keeping a core holding. All the while nice divvies (easily covered) keep ticking over. I can’t quote HL’s research on here but suggest (if you haven’t already) you go to their website and form your own views. Besides, the wife absolutely loves “Dove” and that’s good enough for me.

Gamesinvestor1 17 Dec 2019

Missing targets Hi Doug, what analysis have you done to arrive at the £50 value. I appreciate Unilever has a long history of value growth, but in the last 5 years (and I’m not talking about its share price) the revenue has gone nowhere, the profit has risen but the debt has grown over 300% On top of that the shares trade on a P/E of 21 against a growth of less than 3%. There is every prospect of this trading at 15X+ Regards Games

Uncle_Doug 17 Dec 2019

Missing targets If you don’t have any ULVR this is a good price to start building. Top brands that have been around for decades and will continue to be around for decades. A Keeper for me. Pretty well guaranteed to get back to £50 at some stage in future. I will add another lot if it drops another quid. All IMHO and GLA

Gamesinvestor1 17 Dec 2019

Missing targets Looks like Unilever is missing it’s low end target for 2019 to below 3% after guiding for 3-5% growth. They also think they will miss the first half of 2020 and it will be 2nd half loaded. This looks like a precursor to a string of profit warnings. Stock down 5.3% as I type. Games

Gamesinvestor1 12 Oct 2019

Is it all it is cracked up to be? Doug, I doubt Kraft will be sniffing with its current balance sheet, or RB which is much smaller and is likely to split in two now that it has formed health and home business units. P&G – not sure on this, it sure is very much more US centric and has a lot less international exposure. Unilever has grown its debt a lot over the years so I’d watch it closely. Out of Unilever at the mo, in RB. Games

Uncle_Doug 12 Oct 2019

Is it all it is cracked up to be? ULVR has always had an eco friendly policy - long before it became en vogue. Been in and out a few times over the years and with brands like Hellmans, Persil, PG Tips, Walls, Flora, Dove, Knor, Vaseline, Cif, Liptons, Ben n Jerry, Lynx, Findus, Pot Noodle, etc., I believe you can’t go too far wrong. They probably don’t own all those brands nowadays but I always notice on my travels how many countries stock their goods making it a good currency hedge too. I’m happy to buy on any big dips and 4640 will surely make profit for me at some point. If it goes down I’ll sit tight and buy more. Decent enough divvies and the likes of Kraft, P&G, RB will always be sniffing around.

Gamesinvestor1 12 Oct 2019

Is it all it is cracked up to be? Doug, Did you buy it in a plastic bottle? [link] Games – You’ll need to add to your holding i n a refillable carton.

Uncle_Doug 11 Oct 2019

Is it all it is cracked up to be? Got a few ULVR @4640 today - liked the price.

Uncle_Doug 09 Oct 2019

Is it all it is cracked up to be? Yes, a bit cruel I admit, sorry abt that … it’s just that I came across a note I’d made in Oct 2017 of Bill’s recs for future and they were all pretty much duffers. Now … if he’d shorted all those … I too have plenty of failures: WPP - recovering well this year ITV - need 140p to break even BARC - down 30% BT - need 235p to break even LLOY - down a wee bit VOD - need 170p to break even CNA - just awful - so glad I didn’t average down though RMG - back in at 199p, made profit bottom fishing before I don’t have MKS - very tempted to have a punt at 164p Made profit and still hold or got out of: ABF, AZN, BATS, BOO, BP, CPG, EZJ, FERG, GSK, IAG, NG, NXT, RB, RR, UU, ULVR, WTB Got 35% cash in war chest waiting for a recession/crash

Gamesinvestor1 09 Oct 2019

Is it all it is cracked up to be? Unc - that’s a bit cruel m8, they have all crapped out, but then again you knew that. I have ITV and IMB and WPP and under water in all 3. Games