We recently published a list of the 12 Best Household Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Unilever PLC (NYSE:UL) stands against the other best household stocks to buy according to hedge funds.
Is There a Softening in the Consumer Staple Sector?
On March 21, Bryan Spillane, Bank of America Securities’ senior food and beverage analyst, appeared on CNBC’s ‘The Exchange’ to discuss things across his space and the trends surrounding consumer staples. He said that going through the first quarter of the year and having check-ins with companies has led him to conclude that the conditions in the sector have been soft, which is true across his entire coverage universe. Consumers are pulling back a bit, and there’s uncertainty surrounding the conditions in the sector. What’s surprising is that these trends started in January and extended through the first quarter.
The sector, however, is showing a dichotomy. Spillane believed this is a market for consumer staples, as we are looking for defensiveness and certainty. But at the same time, we are doing that at a time when the fundamentals appear to be decelerating. This creates a dynamic for investors to really understand the market and where it would be best to put their money in, as not all seem as safe as they would typically be.
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The Biggest Challenge in Consumer Staples
According to Spillane, the biggest challenges right now are in the beverage alcohol sector specifically, which dropped off unexpectedly in the first quarter of this year after a weak fourth quarter last year. This can be attributed to visa issues, as cohorts of consumers are not spending as much as before. Similar trends are now materializing in household products and personal care categories as well. While these sectors have been very resilient over the past three years, they are now beginning to show signs of a slowdown. The conditions are a head-scratcher, because these are the products consumers use every day. Thus, general uncertainty around a cohort of consumers, including visa holders and students, is beginning to materialize in the sector’s performance.
These trends have resulted in concerns about whether staples would be less of a safe haven this time around. Addressing these concerns, Spillane said that staples would still be a safe haven if we consider them relative to the world we are living in. Large liquid consumer staples are still a place investors would want to be if they are looking for a place to hide in uncertainty, as they are likely to generate considerable cash flows and pay dividends.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 20 household stocks. We then selected the top 12 with the highest number of hedge fund holders, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A supermarket shelf overflowing with a variety of fast-moving consumer goods.
Unilever PLC (NYSE:UL)
Number of Hedge Fund Holders: 31
Unilever PLC (NYSE:UL) is a fast-moving consumer goods (FMCG) company that operates through five segments: Personal Care, Nutrition, Beauty and Well-Being, Home Care, and Ice Cream. Unilever PLC (NYSE:UL) offers over 400 brands worldwide. Its Beauty & Well-being segment includes skin care, hair care, and prestige beauty, while the Personal Care segment includes oral care products, deodorant, and skin cleansing. The Home Care segment manages fabric care and cleaning products, making it one of the best household stocks to buy according to hedge funds.
The company’s EPS slightly exceeded analyst consensus expectations of £2.965 in fiscal Q4 2024, reaching £2.98, primarily due to solid operational efficiency. However, revenue for the quarter reached £14.2 billion, missing the anticipated £15 billion. The revenue miss was primarily due to currency exchange headwinds and certain market challenges. Despite that, Unilever PLC (NYSE:UL) reported significant growth across its core brands, with its Power Brands collectively posting a 5.3% increase in underlying sales. The Beauty & Well-being segment underwent a 6.5% growth, while the Personal Care segment attained a 5.2% increase. This growth was attributed to a robust performance by brands such as Sunsilk and Vaseline in Beauty & Well-being and deodorant line innovations in Personal Care.
Thus, the company has a strong brand portfolio with high-profile names, which lends it a competitive market advantage and is critical to its long-term success. In a report released on March 18, Celine Pannuti CFA from J.P. Morgan maintained a Buy rating on the company with a price target of £54.00.
Overall, UL ranks 8th on our list of the best household stocks to buy according to hedge funds. While we acknowledge the potential of UL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than UL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
