The Lemon Fool

scrumpyjack wrote:Some interesting comments on Unilever in the FT.

They point out the poor performance since 2019 when Alan Jope became CEO and for the two years before that. They say investor confidence has been eroded because of the focus on ‘stakeholders’ not shareholders. Exane BNP Paribas told its clients Unilever “is too good an asset to be left to continue to flounder”. Its stake in Hindustan Unilever, its separately quoted Indian subsidiary is worth nearly half Unilever’s market value, and Barclays reckons Unilever's sum of the parts discount has widened to about 25%. Exane thinks if Unilever were valued in line with its peers the price would be £78.10, twice its current price.

In spite of all this they seem to think shareholder activism (eg Elliott etc) is not going to get anywhere.

So perhaps best to be patient and hang on?

scrumpyjack wrote:They point out the poor performance since 2019 when Alan Jope became CEO and for the two years before that. They say investor confidence has been eroded because of the focus on ‘stakeholders’ not shareholders. Exane BNP Paribas told its clients Unilever “is too good an asset to be left to continue to flounder”. Its stake in Hindustan Unilever, its separately quoted Indian subsidiary is worth nearly half Unilever’s market value, and Barclays reckons Unilever's sum of the parts discount has widened to about 25%. Exane thinks if Unilever were valued in line with its peers the price would be £78.10, twice its current price.

bluedonkey wrote:I was thinking of adding, though I do agree the share appears to have gone nowhere over the last several years.

Dod101 wrote:The last time the share moved upwards was at the time of the threatened buyout but there never seems to be a lot to excite, a strength but at the same time a weakness.

Dod

TheMotorcycleBoy wrote:My issue with the ULVR right now is the pace of the share buybacks. Yes, they are arguably being executed at the correct price.

It's what is being signalled that I think is all wrong. That is, why aren't they actually using this cash to grow. They could for example be investing in alternative foods for example buying Beyond Meat (BYND) which is currently at Market cap of $7.1B.

Matt

dealtn wrote:

TheMotorcycleBoy wrote:My issue with the ULVR right now is the pace of the share buybacks. Yes, they are arguably being executed at the correct price.

It's what is being signalled that I think is all wrong. That is, why aren't they actually using this cash to grow. They could for example be investing in alternative foods for example buying Beyond Meat (BYND) which is currently at Market cap of $7.1B.

Matt

No thanks. if I wanted an investment in BYND I can do that myself. Why would I need a company to do that for me? Unless there are significant synergies I don't see the logic.

dealtn wrote:

TheMotorcycleBoy wrote:My issue with the ULVR right now is the pace of the share buybacks. Yes, they are arguably being executed at the correct price.

It's what is being signalled that I think is all wrong. That is, why aren't they actually using this cash to grow. They could for example be investing in alternative foods for example buying Beyond Meat (BYND) which is currently at Market cap of $7.1B.

Matt

No thanks. if I wanted an investment in BYND I can do that myself. Why would I need a company to do that for me? Unless there are significant synergies I don't see the logic.

scrumpyjack wrote:I would rather their scientists were thinking up and developing such products themselves rather than paying $7 bn in goodwill for someone else's unproven idea. Eventually that $7 bn has to be written off. They've already got 35 billion euros of goodwill and intangibles in their balance sheet because they have been doing far too much of that sort of thing in the past.

TheMotorcycleBoy wrote:My point is the buybacks, buybacks and more buybacks suggest a lack of imagination. And FWIW the market sentiment would appear to reflect this viewpoint.

TheMotorcycleBoy wrote:I would rather their scientists were thinking up and developing such products themselves rather than buying back their own shares!

TheMotorcycleBoy wrote:

scrumpyjack wrote:I would rather their scientists were thinking up and developing such products themselves rather than paying $7 bn in goodwill for someone else's unproven idea. Eventually that $7 bn has to be written off. They've already got 35 billion euros of goodwill and intangibles in their balance sheet because they have been doing far too much of that sort of thing in the past.

I would rather their scientists were thinking up and developing such products themselves rather than buying back their own shares!

TheMotorcycleBoy wrote:I would rather their scientists were thinking up and developing such products themselves rather than buying back their own shares!

vrdiver wrote:

TheMotorcycleBoy wrote:I would rather their scientists were thinking up and developing such products themselves rather than buying back their own shares!

I assume, since they have a finger in that particular niche, that they're keeping an eye on the developing players. I would also assume that they've concluded that the current crop aren't yet at the stage where they make sense to buy, based on their current development and the cost to get them to the next stage. If they buy now, they are saddled with the future R&D costs, regardless of the outcome. If they wait, a clearer winner may emerge that can then be bought; probably more cheaply than if they'd had to fund all the likely contenders instead of just the one.

Larry Ellison (of Oracle) used to say "it's cheaper to write cheques than software". This may be true for developing meat alternatives as well!

VRD

csearle wrote:If Unilever have cash that they don't know what do with I'd prefer they just give it to the shareholders so that we can invest it in companies that have a clearer idea of how to employ it. Personally as an investor for income I dislike share buybacks because the effect on income is considerably less direct than simply providing it. C.

simoan wrote:
It doesn't matter what your investment approach is; income only, or much more sensibly, total return as practised by the majority of successful investors.