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Unilever: Short-Term Pain Continues And That Doesn't Bother Me

Jan. 06, 2022 5:23 AM ETUnilever PLC (UL), UNLYF21 Comments


  • Last year was a very challenging one for Unilever and the company significantly underperformed other consumer staples.
  • Exogenous factors, such as rising commodity inflation, are largely to blame for that performance.
  • Underneath the surface, however, Unilever now appears to be in a much better position than a year ago, while valuation remains conservative.

Dove Essentials for Bathroom

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Last year was hardly a good one for Unilever (NYSE:UL) shareholders as the company was hit hard by rising commodity prices.

For most of the time since my first analysis of the company, Unilever's share

This article was written by

Vladimir Dimitrov, CFA profile picture

Vladimir Dimitrov, CFA studied at the London School of Economics and is a former strategy consultant where he learned how to properly value intangible assets when screening businesses for potential returns.

He is the leader of the investing group The Roundabout Investor where he teaches the process of evaluating roundabout investments; defined by potential high capital return, growth in free cash flow, safe dividends and conservative capital allocation. He offers weekly investment ideas, a model portfolio, a watchlist, macro outlooks, and sector deep dives. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of UL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Please do your own due diligence and consult with your financial advisor, if you have one, before making any investment decisions. The author is not acting in an investment adviser capacity. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. The author recommends that potential and existing investors conduct thorough investment research of their own, including a detailed review of the companies' SEC filings. Any opinions or estimates constitute the author's best judgment as of the date of publication and are subject to change without notice.

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Comments (21)

Td0815 profile picture
Just out of curiosity: Nobody concerned that EBITDA rose by ~20% from 2012 while net debt more than doubled?
Does it still doesn't bother you. No it's a serious question. RU still long?
Vladimir Dimitrov, CFA profile picture
@gmagel what is bothering me now, is that the management's is showing willingness to do a megadeal at any cost. It definitely raised a red flag, but I am not a daily trader who sells whenever a stock goes south and buys more whenever a stock goes up. Other than that, I don't see anything changing fundamentally for the business. I hope that the share price reaction has taught management a valuable lesson here.
A. Romano profile picture
does it still not pain you?
Frankj78 profile picture
Thanks for a good, insightful article. Long term holding. Low basis. This makes me want to hang on and see what's around the bend.
Mike Zoerer profile picture
Long UL, and at a P/E of below 20 this looks like a safe investment, offering a dividend of about 3,8% (if it goes down a bit and the divi i 4% this is a strong buy for me).Regarding the brands: I think there is brand loyalty and brands that form part of the heritage or "DNA" as sometimes said of a company, that should not be under-estimated by modern managers.I know this sounds oldfashioned but as a matter of fact I will keep buying soups from Knorr, eat the belovey icecream like Cornetto from Unilever, etc. Are these the brands with highest margins? I don't know, and maybe there are some fields that offer great margins and new opportunities but those brands that formed the company and exist for more than 5 decades should not be ignored (like with Nestle, I know they do so many things, but should never get rid of "Smarties"...)
Confoundedinterest profile picture
Nicely done and I agree, adding whenever possible while under $55 for me.
Always looking for Unilever to dip until it reaches a 4% dividend yield. It's always going to be slightly undervalued within its peer group because of being a European company, thus offering good price entry points at every market perceived weakness. I don't doubt Colgate or P&G display an overall better quality in terms of brand recognition and superior management, but not as much as to justify the valuation differences.
Thanks for clarifying exactly what the headwinds are for UL.
Some commodities have already weakened, likely palm oil
doesn't go to the pandemical moon, and currencies also oscillate,
so i accept your interpretation. My girlfriend is a mega-fan of Paula's Choice - she likes the simplicity and walk the talk health awareness of the brand- eliminates unnecessary chemical gunk. a good acquisition.
Global Traveller profile picture
I have a small percentage of my portfolio in Unilever, it was larger and might be again if I get some reassurance that they are going to stay away from political activism and stick to selling household goods........
vooch profile picture
Great article !

UL is indeed the powerhouse in this space, selling at a sweet discount these days. Have a 1/4 position and slowly adding.
Tulip hoard profile picture
Agree with this silly b and j flap combined with markets selling off I will pick up some below $50. 🤑
Vladimir Dimitrov, CFA profile picture
@Tulip hoard growth and momentum are likely to be the worst hit if this market sell off continues.
Great article and I couldn't agree more! Long $UL since mid $40s and never selling. I will gladly add if it falls back below $50.
Vladimir Dimitrov, CFA profile picture
@G-man$$ Thank you! Personally, I am not waiting for a company's share price to hit an exact number to add more. Discipline and patience are my key words here.
vooch profile picture

Hope you picked up
Some at $46 during the GSK hysteria this week - I missed the opportunity grrrrr
PB Investment profile picture
A SWAN company.
I would wait for the dividend yield to reach almost 4%, and then bullish buy!
PB Investment profile picture
@Vladimir Dimitrov, CFA Hopefully it does it again!
Excellent article thanks.
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