If youre investing in stocks and shares, its important to have a list of criteria that a company has to fulfil before you buy a portion of it.
You shouldnt compromise on your investing principles. If a corporation doesnt tick one of your boxes, move on to something else. Even when a business seems incredible, has no debt, a great product and is well established, if something still doesnt add up, remember that youre not obliged to buy its shares. Even if all the market commentators have recommended it.
Look at Warren Buffetts investing style. In the most simple form, he looks for businesses that are trading at a price below intrinsic value and with a competitive advantage over rivals. His company, Berkshire Hathaway, is sitting on piles of cash and is waiting for a great buying opportunity.
So which of my investing boxes does Unilever (LSE: ULVR) tick?
Brands
Without realising it, you probably have half a dozen Unilever items in your cupboard.
The business owns brands such as Marmite, Dove, Hellmans, Sure, Ben & Jerrys and Vaseline. All of these products are household names and are spread across different product lines, making disruption from competitors very difficult.
With a company like Unilever, the portfolio of brands has to be built into its intrinsic value calculation. With this reasoning, thats why I can see past Unilevers stock price, even though it is trading at a price-to-earnings ratio of 21.
The companys brands are sold around the world, and Unilevers geographic diversity also appeals to me.
In addition to this, the business has great brand awareness. For example, something which is divisive and stirs up strong emotions is often described as Marmite. There arent many brands that have this level of public awareness.
Low price point
Another attractive element of Unilever is the low price point of its products. I believe that during a recession, customers will generally stick with Unilever items rather than switching to supermarket own-brand alternatives for a few pence less.
At this level, the purchases will often be based on customer impulse. Its doubtful that many customers will agonise between a supermarket own-brand yeast extract or Marmite, for example.
Competitive edge
If given the task to compete against Unilever and an extremely large bundle of cash would you know where to start? I wouldnt.
With products spread across almost every supermarket shelf, it would be a big ask to usurp even one of Unilevers brands, let alone the whole company.
To an extent, we can see that the supermarkets have tried to take a slice of Unilevers market share with own-brand products. Im doubtful that it has had much of an impact.
Across many of its product lines, Unilever remains the dominant player. I think that will continue to be the case
