Train fends off Unilever critics

Nick Train has defended one of his top-held stocks, Unilever, from critics after its share price wobbled throughout October.

The company has reported a tilt in growth towards emerging markets at the expense of the developed, with exposure to the latter shrinking 2.3% over the last year while the former grew more than 6%.

Writing online, Train, manager of the Finsbury Growth and Income Trust, insisted the tilt simply meant the company was ready for demographic trends across the world. Quoting Paul Polman he said the emerging markets were “where all the people are.”

“Without getting starry-eyed about it – because the last few years have proven again how volatile emerging economies can be – we’re sure that these exposures will be at least a mitigating factor for the companies as consumer brands work out how to readjust to the 21st century,” Train said.

Unilever accounts for just under 10% of the Finsbury trust and endured a rocky time throughout October after its share price first hit an all-time high of £45.48 before dropping off 6% over the course of 10 days.

“Perhaps there is little surprise that some investors should be looking for an excuse to take profits..."

“Perhaps there is little surprise that some investors should be looking for an excuse to take profits,” Train said, adding that the end of year results published in October were “purportedly” disappointing.

He does, however, point out that the share price year to date remains up 29% despite October’s falls.

Hindustan Unilever (HUVR), its Indian subsidiary firm, also gives good reason to feel positive about Unilever’s prospects as a whole, Train added.

He said: “We look at the share price return on Hindustan Unilever (HUVR) as indicative of the excitement that investors may come again to feel about the shares of the parent.”

The HUVR share price hit an all-time high in November 2017, and is up 56% so far this year. Its shares have increased six-fold in a decade.

“This is both a nice reminder of the rewards for patient investing into emerging markets, but also of how important an asset it has become for the overall valuation of Unilever,” Train added.

“A near 3% dividend yield, with a dividend that has grown at nearly 10% pa over the last decade is no reason to argue that Unilever is cheap – we long ago realised that yield alone has no predictive value for total share returns. But I still find it reassuring.”

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