#323862
Postby ADrunkenMarcus » July 5th, 2020, 12:16 pm
I hold both RB. and ULVR:
They say past performance is no guide to the future, but I do not know the future and I only know their past performance. By the way, the figures above for RB. ignore the Indivior spin off in 2014 which I disposed of (it was a tiny holding) and the total return figure is just capital gain per share plus dividends so it assumes dividends have piled up as cash and not been reinvested. If the total return was done properly on a unitised basis (accumulation units, dividends treated as withdrawal so sells some units) you'd probably add a 0.5+ percent per year to the CAGR.
In terms of ULVR, its recent performance in terms of ROCE and operating margin is quite pleasing to me and are hallmarks of a quality business. There's little growth in the developed world but plenty in emerging Asia. I do think there are issues around brands and pricing power but I am sure these issues are well known to management. Their recent decision to domicile in the UK is evidence of their willingness to make changes. It is often thought of as being a bit sluggish but it's more than doubled for me since purchase in 2013 and this is chiefly due to fundamental growth in free cash flow rather than re-rating.
RB.'s Mead Johnson acquisition did not go to plan and they took a huge write off in 2019. It saddled them with lots of debt and trashed their clean balance sheet, so the ROCE has fallen steeply from the mid 20s to barely 10 percent. However, the operating margins have held up better and debt will hopefully come down over time. They are also reinvesting more into the business after some years of neglect and this will have a temporary depressive effect on margins.
I'd note that both companies are continuing to pay dividends. RB. is 3 percent of my folio and Unilever about 10 percent. I'm holding both!
Best wishes
Mark.