Here’s why I will buy this FTSE 100 stock in November

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I remember when Unilever (LSE: ULVR) was arguably the most popular and admired FTSE 100 stock on the index. It wasn’t that long ago, either.

The packaged food and consumer goods giant was seen as a stock for all seasons. As a purveyor of soap, shampoo, bleach, sprays, and ice cream, sales rose when consumers were feeling flush. Yet revenues held up in the bad times, too, as people cut back on luxuries rather than Unilever’s low-cost everyday essentials.

I’m hunting for FTSE 100 stocks

Fundamentally, Unilever hasn’t changed. It still boasts a raft of huge global brands including Axe, Ben & Jerry’s, Dove, Lifebuoy, Hellmann’s, Magnum, Persil, Sunsilk, Vaseline and Wall’s. Customer numbers are soaring as emerging markets play catch up with the West.

What has changed is that management has lost its way. Critics have accused the board of pursuing a ‘woke’ agenda while failing to pay attention to the bottom line. Unilever also missed an open goal in the pandemic, by failing to boost hygiene and packaged food sales.

Its big shareholders are unhappy. Activist hedge fund investor Nelson Peltz acquired a stake in the wake of Unilever’s failed £50bn bid for GlaxoSmithKline’s consumer-health business, hoping to force change. He’s now on the board.

Peltz isn’t the only investor who thinks the business is in need of a shake-up. The Unilever share price certainly needs a fresh injection of life. It’s up just 1.6% in the past 12 months, and down 14% over three years.

It is struggling to make headway despite reporting an 8.1% increase in first-half underlying sales in July, as strong pricing offset input cost inflation. All four divisions delivered, and management expects underlying sales growth for 2022 to beat previous guidance of 4.5% to 6.5%.

Unilever appears to have pricing power, which has enabled it to hold full-year underlying operating margins within its guided range of 16% to 17%.

I’m a private investor, not an activist investor. I accept that Unilever needs an overhaul, but I still think the underlying business is strong. Personally, I would rather buy before it is on the mend, to take advantage of today’s highly tempting entry point.

I’ll buy Unilever this month

For years, Unilever has been trading at around 24 times earnings and yielding around 2.5%. Today, its valuation has dropped to 17.6 times earnings while its dividend yield is a halfway handy 4.4%, covered 1.5 times by earning.

Yes, the “medium-term macroeconomic and cost inflation outlooks are uncertain and volatile”, to quote Unilever itself, but that is partly reflected in today’s price.

I am currently hunting for FTSE 100 stocks at bargain prices, with the aim of holding them for at least 10 to 15 years. Having such a long perspective means I don’t have to worry about a company’s short-term problems.

So far I’ve bought FTSE 100 stocks Persimmon and I’m gearing up to buy Rolls-Royce. Once I get the cash, I’ll buy Unilever, too. Certainly before the month is out.

The post Here’s why I will buy this FTSE 100 stock in November appeared first on The Motley Fool UK.

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Harvey Jones holds shares in Persimmon. The Motley Fool UK has recommended 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.