With the stock market at record highs, investors still want growth but they’re skittish. Great “defensive growth” plays can be found among European blue chip multinationals, which are often given short shrift because of concerns about the continent’s political and economic stability.
But Europe appears to be the place to invest in 2015, as a cheaper euro, a looser European Central Bank (ECB) monetary policy, and cheaper oil prices help major eurozone nations such as Germany, France, Italy and Spain get back on their feet.
In this context, a promising pick right now is diversified consumer giant Unilever N.V. (ADR) (UN). With dual headquarters in London and the Netherlands, Unilever sells about 400 well-known consumer brands in more than 170 countries in Africa, Asia, Latin America, the Middle East, North America and Western Europe.
Unilever stock is poised to have a good year, as recovery aided by government stimulus programs prompt consumers to buy the everyday goods they need.
Unilever’s portfolio of household items comprises a wide range of categories, including ice cream and beverages, salad dressings and sandwich spreads, and beauty care.
The company’s brands adorn shelves around the world and are familiar sights to consumers as they walk down the supermarket aisle: Hellmann’s mayonnaise, Vaseline, Bertolli pasta sauces, Lipton tea, Knorr soups, Lux and Dove soaps, Surf detergent, Ben & Jerry’s, Klondike, Slim Fast, Popsicle, Ragú, Pond’s skin cream, and Sure and Degree antiperspirants. They’re all blockbuster sellers and enjoy enormous consumer “mind share.”
Unilever is making inroads into developing nations where newly ascendant middle classes associate Unilever’s colorful brands with the coveted affluence of the West. As the start of 2015 looms on the horizon, Unilever enjoys several tailwinds, in addition to broad economic recovery.
First is a cheaper euro. The shared eurozone currency has dropped about 10% against the U.S. greenback so far this year, but the decline isn’t over yet as the ECB aggressively reduces interest rates to stimulate growth. A weaker currency benefits exporters such as Unilever, because it makes goods cheaper for foreign buyers.
Then, of course, there’s the windfall of cheaper oil prices. The price of oil is about 50% off its five-year highs, which reduces Unilever’s production costs and also puts more money into the pockets of its customers.
Unilever’s prospects next year are additionally boosted by the steps it has taken to foster efficiencies throughout its vast supply chain.
Manna For Unilever Stock
These trends are manna for Unilever stock and also the company’s closest rival Procter & Gamble Co (PG), the consumer brands powerhouse based in Cincinnati. Among the two titans, Unilever seems better positioned right now because it brings in more sales from developing countries and boasts a leaner operation.
In the third quarter of 2014, Unilever’s revenue declined 2% year-over year to 12.2 billion euros ($15.4 billion), dampened by an unfavorable currency impact of 2.6%. The company delivered year-over-year organic sales growth of 2.1%. Underlying conditions point to faster revenue growth in 2015 and beyond.
Global economic indicators are increasingly sanguine, but the stock market hovers in overbought territory. Investors who seek both growth and downside protection are well-advised to stick with a large-cap, global consumer company such as Unilever, which makes trusted products of universal appeal and entrenched brand name recognition.
As of this writing, John Persinos did not hold a position in any of the aforementioned securities.
