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Macroeconomic volatility and geopolitical tensions have hurt global markets, including the FTSE 100.
The byproduct of this has been some quality stocks trading at bargain levels.
Let’s dive into what’s happened, and I’ll explain why I’m looking to snap up Unilever (LSE: ULVR) shares when I next have some investable cash.
Testing times
Soaring inflation and rising interest rates have been at the forefront of the causes of recent turbulence. This isn’t just in the UK, but throughout the world too, including major economies such as the US. Plus, growth slowing in the Chinese economy has hurt investor sentiment globally too.
In addition to this, further issues including a cost-of-living crisis in the UK, as well as a tricky property market have created a cocktail of uncertainty and reluctance to invest.
Furthermore, geopolitical tensions in certain parts of the world haven’t helped an already tough backdrop of global events.
However, it’s easy to be fearful and sit back to watch and ride out the current volatility. I could easily do this. Alternatively, I’ve decided to follow Warren Buffett’s advice and be greedy when others are fearful and look to bolster my holdings now with a view to recovery down the line.
Unilever
One of the victims of recent events has been Unilever. The consumer goods giant is trading at levels not seen for a while, making it appealing to me.
The shares are down 4% over a 12-month period, from 4,352p at this time last year to current levels of 4,052p. It’s worth noting the shares have spiked since the firm announced positive full-year results a few weeks back.
From a bullish perspective, Unilever’s brand power and reach is unrivalled, in my opinion. It is the owner of over 80 household and personal care brands, and many of its products are essentials consumers use on a day-to-day basis.
Moving on, the business seems to be dealing well with the current volatility. Full-year results released earlier in the month showed that putting prices up due to inflationary pressures has helped keep revenues and performance growth going, but sales volumes have been impacted.
From a bearish perspective, continued volatility could spell bad news, at least in the short to medium-term, in my view. Rising costs could eat into profit margins if the turbulence continues for a prolonged period. Plus, consumers with less cash may look for non-branded products compared to Unilever’s branded items, which are considered premium.
Finally, Unilever’s current valuation is enticing. The shares trade on a price-to-earnings ratio of just under 15. The historical average is over 20. Plus, a passive income opportunity with a 3.8% dividend yield is attractive. The business also recently announced a lucrative share buyback scheme, which signals to me that the firm is in the business of providing shareholder value. However, I’m conscious dividends are never guaranteed.
Despite current volatility, I reckon Unilever shares will provide consistent growth and returns in the longer term. With that in mind, buying cheaper shares now and riding out the turbulence at present could prove to be a savvy move for me and my holdings.
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