I have written in the past how "boring" stocks can be brilliant. Today we have had an update from one of the boring stocks I featured and I have a sell rational for another. So if your not put off by the boring bit here goes.
First up we had Q1 results from Unilever (ULVR) today - it doesn't get much more boring than that does it? They summarised it as a good start to 2015 helped by currencies which gave them a 10.6% boos to their turnover. Aside from that they reported underlying sales growth of 2.8% which included 1.9% gain from price increases.
Within the underlying sales growth was a 5.4% gain in emerging market sales which is one of the reasons I like this one as they seek to sell more of their consumer products to the developing consumer markets in the emerging market economies.
So enough on that already as I'm sure you can find all the detail on the results elsewhere. However in terms of valuation this is now getting quite rich on this one given the share price performance as you can see in the graph below. The rating
has got quite rich on this one with a PE in excess of 20x, although the earnings yield is around 6.5% and the dividend yield is still around 3% and 1.5x covered by earnings and forecast to grow at around 7% for the next two years. This all leaves it looking around average with a 53 Score on the Compound Income Scores. So getting a bit twitchy about the valuation up here and the recent earnings revision trend has been poor, so will be worth watching to see if this update can turn that around, so just about a hold for me given the quality, yield and expected growth.
However on a similar track I have reduced recently another of my boring stocks which has also enjoyed a decent re-rating and share price performance. Again this was one of the boring is brilliant stocks I featured call Berendsen (BRSN).
So why have I decided to reduce this one? Well in this case it comes down to a combination of valuation 18x and 2.8% yield, poor estimate revisions, the Compound Income Score of 39, likely negative currency translation effects from their large operations in Europe and director selling (click link to see details). This latter point was the catalyst for me to reduce my holding while the going is good as this one has in the past been vulnerable in an economic downturn (see previous update for more on this), although I accept I'm probably way too early on that front. I just feel on the current valuation and growth prospects it is up with events and I can probably find better value elsewhere.