Shares in FTSE 100 consumer goods giant Unilever (LSE: ULVR) were on the front foot in trading this morning, despite the company posting a fall in underlying sales growth over the three months to the end of September. The 2.9% rise achieved by the 120bn-cap business over the third quarter of its financial year was down from 3.5% in Q2.
That investors dont seem all that concerned may be partly down to the fact the companys performance in emerging markets was more encouraging. That highlights why geographically diversified companies such as Unilever can be ideal for most defensively-focused portfolios. In these markets, collective sales rose 5.1%. Overall revenue increased by 5.8% in line with analysts forecasts, although this was helped by a 2.3% currency boost.
Investors are also likely to be relieved by the prediction full-year results will show an improvement in profit margins and another year of strong free cash flow. Looking ahead, Unilever said it was now anticipating underlying sales growth of somewhere in the lower half of its multi-year range of 3-5% in 2019.
Newish CEO Alan Jope (who replaced Paul Polman at the helm late last year) seemed satisfied with these numbers, saying the performance had shown a good balance between volume and price. He also commented that the owner of sticky brands, such as Marmite and Pot Noodle, was taking action to remain relevant to the consumer of the future, such as setting stretching goals on plastic use.
So, are the shares worth buying? Well, they certainly arent cheap, despite being 12%-or-so lower in value than the all-time high hit back in September. That said, the current price-to-earnings ratio of 21 is pretty much bang on its average valuation over the last five years, suggesting that new investors wont necessarily be overpaying. A 3.1% yield, while nowhere near as high as that offered by other top-tier firms, is worth grabbing and should be adequately covered by profits.
For me, Unilever is just the sort of stock to hold if markets get choppy. It wont necessarily rise while others fall, but the predictability of its earnings should ensure any damage is both temporary and relatively limited.
Another defensive demon
Another stock I think should appeal to defensively-minded investors is Robinsons and J2O owner Britvic (LSE: BVIC). Even if the UK does enter a recession, demand for small-ticket items, like the drinks produced by the FTSE 250 member, is unlikely to be hit as hard compared to those selling more discretionary items.
Things have been fairly quiet at the business since I last looked at its stock in July. The only real news was the appointment of a new chief financial officer (Joanne Wilson). To be honest, thats how things should be with any company worth holding for the long term no panic, no stress, just quietly chugging along.
Notwithstanding this, Britvics stock has been in scintillating form, moving almost 40% higher in the last twelve months alone. Following this strong performance, shares currently change hands for almost 19 times earnings. Again, thats not cheap compared to the general market, but it does, I think, reflect the quality on offer (based on consistently stellar returns on capital employed).
A secure-looking 2.8% dividend yield is another bonus, particularly for those only looking to protect their wealth in the event of an economic downturn.
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