2020 was a good year for safe stocks or defensive shares as pessimism hung over investors’ mood. But 2021 has not been quite as benevolent as the bulls came charging back into the stock market. FTSE 100 consumer staples and healthcare stocks have sagged as a result.
But can this be a good time to start buying these stocks? Investors’ interest could return to them as cyclical stocks become pricier by comparison.
I looked at three that have released updates recently.
#1. Unilever: signs of turnaround
The FTSE 100 consumer goods giant Unilever (LSE: ULVR) is a big gainer at the stock market today as I write, after it posted its trading update. Even though its turnover, based on generally accepted accounting principles (GAAP), is down by around 1% for the first quarter (Q1) of 2021, its underlying numbers are strong.
Underlying sales growth is up 5.7% to €12.3bn, driven largely by volume growth. It has benefited from a weak base of 2020, which I expect will continue to drive the rest of 2021 as well. It expects growth to be in the 3% to 5% range, which is in line with its multi-year framework.
In a year with a weak base, however, it does not sound terribly positive to me. Also, one of its key growth markets is India, which is seeing a fresh wave of coronavirus restrictions.
I like the stock as a long-term buy, but if I had a three-year holding period in mind, I will consider it carefully.
#2. GlaxoSmithKline: results disappoint
The FTSE 100 pharmaceuticals and healthcare biggie, GlaxoSmithKline, posted a poor set of Q1 2021 results yesterday with an 18% fall in turnover compared to Q1 2020. Net profits fell by 25% and earnings per share are down by 32%.
The company attributes this washout performance to Covid-19-related disruptions. Considering its strong performance in the years before, I am optimistic for its future. This is further strengthened by the fact that it expects “meaningful improvements…in revenues and margins”.
It also has a strong dividend yield of around 6%. I would consider buying it from the income perspective.
#3. Reckitt Benckiser: mixed bag
Consumer healthcare biggie Reckitt Benckiser, or Reckitt as it now prefers to be called, posted a mixed bag of a trading update yesterday. Its reported a 1.1% decline in reported revenues because of currency fluctuations.
Its like-for-like sales, however, were up by 4.1%, driven by a huge 28.5 % increase in its hygiene business. The growth in hygiene came from brands like Lysol, Air Wick, and Finish, with geographies like the US, UK, and India reporting double-digit growth.
But its two other segments, health and nutrition, shrank in Q1, 2021 driven by Covid-19-related restrictions. Like Unilever, another coronavirus wave in India could impact Reckitt in 2021 too. In any case, it expects like-for-like sales to slow down to 2% for the year.
I would wait and see how its situation develops before buying Reckitt.
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.