Unilever Crashes While Pundits Predict The Powell Put Price Point
The markets awoke from their long weekend slumber to discover the world is the same as last week, with everybody fearing a hawkish federal reserve. The biggest topic of conversation in the financial community seems to be at which level of decline with the “Powell put” take effect. No one knows, but we do know it’s much lower than today’s market prices. Speaking of which, the Dow was off 543 points while the Nasdaq lost 2.6%. The Russell brought up the rear once again with a 3% pummeling.
In other news, Microsoft announced plans to buy Activision Blizzard (#ATVI), a stock we recently featured as it bounced along it’s 52 week lows. This was actually a stock that I had added to my watchlist, but didn’t end up pulling the trigger. Hindsight is 20/20, but I’m kicking myself just a little with the stock trading up over 25% on the day.
Now on to the lows, where the biggest loser of the day was the maker of Vaseline Petroleum Jelly (and over 400 other consumer brands) Unilever PLC.
Unilever PLC (#UL)- 1/18/2022 Snapshot
Unilever finished the day off more than 14% on news from ratings agency Fitch, taking the company to task over its proposed bid for GlaxoSmithKline’s consumer health division. Fitch was quoted as saying: “Unilever’s offer… is likely to raise Unilever’s debt to an extent that it would not be able to reduce to levels consistent with an ‘A’ rating category over 2024-2025, opening the possibility of a multi-notch downgrade into the BBB category”.
Today’s move wipes out more than 3 years of dividend payments, which reminds us that just because a stock pays a nice dividend doesn’t make it safe.
Pros:
Steady Revenues
Stable Business
Good Access To Funding Markets
High Net Profit Margins
Healthy Dividend
The stock is now well below it’s recent trading range
Cons:
P/E is a little high for such a boring company
Price to Book is high compared with its competitors, for example Kraft-Heinz trades at a price to book of 0.92
There’s a lot of debt on the books that could be exacerbated by the GSK acquisition