Legendary US investor Warren Buffett mostly works on his home turf. But he does make the occasional foray onto this side of the Atlantic. Today, I want to highlight a FTSE 100 stock I know Buffett has admired and explain why I think he’d buy it today.

The company is consumer goods group Unilever (LSE: ULVR). This £100bn firm recently made headlines with a failed bid to buy GSK‘s Consumer Healthcare division. It was also the most-purchased share by clients at broker Hargreaves Lansdown last week. I’m normally cautious about popular stocks, but I’m interested in Unilever. Here’s why.

Why is Unilever making headlines?

Brands such as Hellmann’s, Domestos and Ben & Jerry’s don’t need much introduction. But it’s no secret that Unilever has been struggling to deliver much growth recently.

In fact, Unilever’s sales and profits in 2021 are expected to have been lower than they were in 2017, when Buffett formed part of a bid to buy the FTSE 100 group for $50 per share (around £37).

That bid was rejected, and the deal went no further. But the underperformance that led to Buffett’s approach still seems to be an issue today. With inflation rising in many markets around the world, Unilever is putting up prices to offset higher costs. Unfortunately, that’s hitting sales volumes as hard-pressed consumers buy less, or choose cheaper alternative brands.

I don’t see any serious risk to Unilever’s big brands, or its long-term survival. But I agree with outspoken fund manager Terry Smith that something needs to be done to return this business to growth.

What’s changing?

Chief executive Alan Jope hit the headlines again on Tuesday when he said that around 1,500 management jobs will be cut as part of a global reorganisation. Alongside this, its main business groups will be split into more self-contained units — ice cream will become a standalone division.

These changes seem fine to me as far as they go, but they’re not exactly earth-shattering. Job cuts and reorganisations are a standard response from big companies under pressure to perform.

My fear is that you can’t always do more with less. I think Unilever may need to invest more in new product development and brands, rather than relying too heavily on pricey acquisitions for new ideas.

Why I think Buffett would buy this FTSE 100 stock

Buffett once said: “I like buying quality merchandise when it is marked down.” That’s where I think Unilever is today. The company is going through a difficult patch, but it’s been in business for more than 100 years and hasn’t cut its dividend for over 50 years.

Smith says that despite his criticisms, he’s still holding Unilever in his funds “because we think that its strong brands and distribution will triumph in the end.” That’s my view too.

Unilever is currently trading on 18 times forecast earnings and offering a 3.6% dividend yield. I think that’s good value for this FTSE 100 stock, given its quality credentials.

I’ve added to my Unilever holdings recently, so I’m not buying more at the moment. But if I hadn’t already bought, this FTSE 100 stock would be top of my shopping list right now.

Roland Head owns Unilever. The Motley Fool UK has recommended GlaxoSmithKline, Hargreaves Lansdown, 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.

As I write these words, London’s Footsie is at 7,289. That’s over 4% down from its 17 January peak of 7,611 — which was its highest since its pre-Covid level of 7,675 on 17 January 2020, almost two years previously.
 
But the nervousness extends far beyond the UK’s shores. The FTSE World Index peaked on 4 January, and is now down 9% from there, while the pan-European Euro Stoxx 50 is down 7% from a 5 January peak.

Over the Atlantic, the Dow Jones is down 8% from a 4 January peak, while the tech-heavy NASDAQ is down almost 15% from a 3 January peak.

Plenty to worry about

Why are markets nervous, exactly?
 
Lots of reasons: inflation, the prospect of imminent interest rate rises, soaring energy prices, Covid-19, the prospect of war in Ukraine — it’s not difficult to find things to worry about.
 
Putting a little flesh on those bones, here in the UK inflation reached a 30-year high earlier this month, while the latest figures show that economic activity is at an 11-month low.
 
And even the politicians are now arguing among themselves over the merits of April’s coming tax rises — even though they voted for them in September.

Uneven fortunes

That said, looking at individual shares, the pain is unevenly spread.
 
Over in American markets, there’s been something of a rotation out of tech stocks, for instance. Stocks with Covid as a narrative backdrop have certainly suffered — think Peloton and Zoom — but even the ‘big hitters’ are down.

On the flip side, there’s a fresh appreciation of value shares and income plays. The Footsie might have fallen during January, but tobacco giant Imperial Brands is up 6%. Rival British American Tobacco is up 13%. HSBC is up 7%.
 
My own portfolio — stuffed with investment trusts, Real Estate Investment Trusts, income stocks and defensive stocks, is down just 3%.

Downward pressure

What to do? How to play this market?
 
Obviously, markets could fall further. Much further. Bad news on the economy front, bad news on the energy front, and bad news — or rather, worse news — on the inflation front: all of these could see markets fall heavily.
 
So too, equally obviously, with the front line separating Russian and Ukrainian troops.
 
Less dramatically, it’s also necessary to keep in mind the effect of inflation and energy prices on consumers’ disposable incomes. As household budgets get tighter, people will indulge in less discretionary spending — cinemas, pubs, restaurants, and general leisure activities, for instance. Shares in those sectors will feel the pain.

Watch for bargains

Even so, it’s worth keeping an eye on some of Footsie’s recent fallers, which may pop into ‘bargain’ territory if markets fall further.
 
Running my eye down my Google Sheets spreadsheet that show companies’ share prices between two dates, it’s not difficult to spot some potential candidates in the FTSE 100.
 
Croda International, for instance, down 18%. Experian, down 16%. Ferguson, down 12%. Hargreaves Lansdown, down 5%. Next, down 7%. And Greggs, down a whopping 21%.
 
As I’ve written before, many of my best investments have been in beaten-down temporarily unloved companies bought at bargain prices.
 
Mining company BHP, for instance, bought at 595p in January 2016 when the mining sector fell out of favour. As I write these words, the share price is 2,333p.
 
Remember: just as markets invariably overshoot on the upside, they just as invariably overshoot on the downside.

Malcolm owns shares in Imperial Brands, HSBC, Greggs, and BHP. The Motley Fool UK has recommended British American Tobacco, Croda International, Experian, HSBC Holdings, Hargreaves Lansdown, Imperial Brands, Peloton Interactive, and Zoom Video Communications.

On paper, it seems as if NatWest Group (LSE: NWG) could be too cheap for me to miss. The FTSE 100 bank trades on a forward P/E ratio of 11.2 times. It also carries a 4.1% dividend yield, much better than the 3.5% Footsie average.

Fans of NatWest argue that things are looking up for the bank as the economic recovery continues and central banks raise rates. Indeed, the share price was up 2.7% Wednesday as traders expect the Federal Reserve to get tough on raising rates after it meets later today. Such talk leads to speculation that the Bank of England will follow a similar path.

Higher rates will be good for NatWest as it’ll increase the profits it can make on lending. This FTSE 100 share has risen 66% over the past 12 months as investors have responded to Britain’s improving economy and the prospect of multiple rate hikes by the Bank of England.

However, it’s my belief that buyers may have been getting a bit carried away. To my mind, the risks of buying the shares remain significant.

Covid-19 and Brexit threats

The ongoing threat of Covid-19 to bank earnings is something I think NatWest’s rampant price rise doesn’t reflect. Sure, vaccination rates in the UK are higher than the global average. But the steady emergence of coronavirus variants remains a massive danger to economically-sensitive stocks like this. BA.2 is the latest rapidly-spreading variant to spook the medical community.

More virus mutations could be coming down the pipe too to threaten the global economic rebound. This has the potential to not only damage expected revenues growth at banks like NatWest and push up bad loans. The economic consequences of a worsening Covid-19 crisis could also prompt central banks to ditch plans for strong and sustained rate rising.

It wouldn’t be a surprise to me to see the share price reverse sharply then. But its troubles stretch beyond the possibility of coronavirus-related turbulence in the short to medium term because of Brexit.

The Centre for Economics and Business Research says that Covid-19 and Brexit have cost the UK economy similar amounts running into hundreds of billions of pounds. However, the body warned that Brexit-related bills are now rising at a faster pace.

Why I’d ignore NatWest and buy other stocks

I also worry for it because the competitive pressures it faces are increasing rapidly as well. Challenger banks such as Revolut and Starling Bank have been steadily eroding the customer bases of traditional banks like these with their digital-led operations over the past decade. ‘

Buy-now-pay-later specialist Klarna’s decision to roll out a payments card that can be used in physical stores adds another significant danger to NatWest and its peers.

So while the share price is cheap, I think its low cost reflects the broad spectrum of dangers it faces. I’d rather buy other UK shares today. There are plenty of other cheap British stocks for me to choose from, after all.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

I’m searching for the best FTSE 100 shares to buy in February. And WPP (LSE: WPP) and Lloyds Banking Group (LSE: LLOY) have caught my eye.

Not only do they look mighty cheap from an earnings perspective. These two Footsie favourites also offer up some decent dividends. WPP’s yield sits at a handy 3%, while Lloyds’ is even fatter at 5%. The latter beats the FTSE 100 average of 3.5% by a healthy margin.

Both WPP and Lloyds’ share prices look incredibly cheap. But which of these would be the best stock for me to buy today? Let’s take a look.

A rebounding FTSE 100 stock

2021 was a strong year for media agencies like WPP as advertising spending bounced back. The firm’s latest financials showed like-for-like sales up 15.6% in the six months to September.

Fresh data from The Institute of Practitioners in Advertising suggests ad expenditure should remain strong this year at least too. The organisation predicts total spend will also rise a solid 5.2% in 2022.

So I believe WPP remains a great FTSE 100 stock for me to own. I’d even go on to say that I don’t think this is baked into the company’s low share price. City analysts think earnings here will rise 14%, resulting in a forward price-to-earnings growth (PEG) ratio of 0.9. A reading below 1 suggests that a share could be undervalued.

As a long-term investor, I’m concerned by many companies bringing their marketing and advertising operations in-house. WPP is also facing intense competition from other agencies as well as consultancies.

Still, it’s my opinion that these dangers are reflected in this stock’s low very-cheap share price. I think WPP’s considerable financial clout and industry-leading reputation across the globe — along with its increased focus in the fast-growing digital advertising market — will produce big shareholder returns over the long haul.

Is Lloyds worth the risk?

I’d be more reluctant to invest in cyclical, UK-focused shares like Lloyds Bank though. The outlook for the British economy continues to darken amid supply chain problems and soaring inflation. Indeed, in recent hours, the IMF cut its 2022 growth forecasts for the UK to 4.7%, from 5% previously.

In this environment the profits picture for banks like Lloyds is looking increasingly fragile. City analysts are expecting the bank’s earnings to drop 23% year-on-year in 2022. An even-more painful drop could be coming down the pipe if bad loans rocket and revenues growth stalls. Both of these are realistic scenarios to me as businesses and individuals feel the punch.

This is why I’m nonplussed that Lloyds’ share price looks cheap, based on current broker projections. Today, the FTSE 100 bank trades on a forward price-to-earnings (P/E) ratio of 8.3 times. I’m also concerned by the rising challenge established banks face from challenger banks like Monzo and Starling Bank.

So I’ll avoid lloyds. But I could be wrong, of course, as it has a strong position in the UK and is investing heavily in technology to exploit the digital banking boom.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.

In the US, investors are worried about a substantial stock market crash. Meanwhile, UK stocks have held up pretty well so far in 2022. In fact, the FTSE 100 index has gained more than 105 points (+1.4%) since 31 December. Perhaps because the Footsie is unloved and undervalued, as I’ve repeatedly argued throughout 2020-21? Indeed, I still view many FTSE 100 stocks as firmly in bargain-bin territory. That’s why I’ve kept a close eye on the Unilever (LSE: ULVR) share price, which has been on a roller-coaster ride since mid-January.

The Unilever share price drops and then pops

The Unilever share price has recorded only modest gains over the past five years. Here’s how this popular stock has performed from 2016 to 2021 (excluding dividends):

The Unilever share price had a great 2017, soaring by more than a quarter (+25.3%). Alas, it failed to hit the heights over the next four years, falling by 0.4% in 2018 and losing more than a tenth (-10.2%) last year. Hardly the returns one might hope for from a widely admired, quality business, right?

As I write, the Unilever share price stands at 3,833.72p, down 102.28p (-2.6%) on Tuesday’s close. At this level, the consumer-goods giant is valued at a mighty £97.9bn, making it the third-largest company in the FTSE 100 index. This also leaves it down 111.78p (-2.8%) so far this calendar year.

However, following a failed £50bn bid for GlaxoSmithKline‘s Consumer Health arm (GSKCH), Unilever shares went into a tailspin. After closing at 3,936.5p on 14 January, the Unilever share price plunged as low as 3,450p on Friday morning (19 January), before rebounding strongly this week. Indeed, since Friday’s low, ULVR has leapt by a ninth (+11.1%) in under four days.

Did I miss buying Unilever on the cheap?

Last week, both Unilever’s share price and its management took a battering from major shareholders and financial pundits. Many criticised Unilever chief executive Alan Jope and chief financial officer Graeme Pitkethly for what they saw as an imprudent and over-priced bid for GSKCH. There were even calls for change at the very top of Unilever’s management team.

As the Unilever share price slid, I decided that it was high time to ‘press the button’ to add Unilever stock to my family portfolio. Unfortunately, I then fell ill (but not with Covid-19), missing my chance to buy at what I considered to be a bargain price below £35. Rats!

So my big question now is: have I missed out buying while the Unilever share price still offers value? At their current level, Unilever shares trade on a price-to-earnings ratio of 22.2 and an earnings yield of 4.5%. The dividend yield — almost 4.3% a year at Friday’s low point — now stands at nearly 3.9%. That’s broadly in line with the FTSE 100’s dividend yield of around 4% a year.

Although these fundamentals are not as attractive as they were on Friday, they’re good enough for me. Hence, my wife — the portfolio administrator — will shortly add ULVR to our holdings. We’ll see how this beaten-down stock will get on over the next five to 10 years. However, Unilever and its share price faces several high hurdles. Famed activist investor Nelson Peltz has built up an undisclosed stake in the group. Unilever announced 1,500 job cuts this week. And more restructuring news follows in February. Hence, let’s see what happens next…

Cliffdarcy owns shares of GlaxoSmithKline. 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.

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Last year, there was already speculation that the price of crude oil could rise to $100 a barrel. It did not seem terribly surprising, considering that the recovery was underway and demand was clearly outstripping supply. Further, keeping in mind that travel was likely to pick up soon, demand for oil was expected to gain further strength. Then late last year, reports started doing the rounds of crude oil forecasts at $150/bbl this year and the number of voices saying this have only gained ground since. This is an almost 75% increase from the current price, which could have huge implications for FTSE 100 stocks.

FTSE 100 oil giants could be big winners

The two most obvious stocks it has implications for are the oil giants BP and Royal Dutch Shell. After languishing during the pandemic when demand for oil plunged, taking the price along with it, they swung back into profits last year as things started opening up. Even without predictions of oil prices at $150/bbl, I was of the view that there is significant upside to these stocks. 

They are still trading below pre-pandemic prices, though that could change soon as they continue to rake in profits and their dividends rise. In my opinion, oil stocks maybe be to 2022 what mining stocks were to last year. A massive rally in the price of the commodity produced leads to a dividend bonanza for investors, essentially. 

Of course, over the long term, oil companies are still on shaky ground as the move towards green energy continues. And they might or might not be able to successfully transition into clean energy producers. But for the medium term, I think they look good. I bought both of them a while ago, and they have stood me in good stead. I could add to my holdings now. 

Stocks that could be adversely impacted

But while these are good stocks to buy, there are other stocks that have become riskier to hold. The reason is simple. Higher oil prices mean higher inflation. Price rise is already out of control and could well eat into profits for FTSE 100 companies. One of them could be the grocer Tesco, whose sale of non-essential and price-sensitive products could suffer. 

Another is Rolls-Royce. It has already been impacted by the travel bans of 2020 and 2021. Even now, travel is far from its pre-pandemic levels. And if airlines rising costs’ show up in prices, we might not be inclined to travel very much in 2022 either. I would watch out for both stocks’ next updates to figure out exactly how inflation impacts them and decide whether to buy them or not. It could be that they are able to either pass on price rises effectively to customers or their industry is not impacted as much as expected right now. But it is clear that the winners for 2022 will most likely be oil stocks. 

Manika Premsingh owns BP and Royal Dutch Shell B. The Motley Fool UK has recommended Tesco. 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.

Last year at this time was an optimistic one. Vaccines development had happened only a few months ago and it seemed to be only a matter of time before the economic engine would be back with a bang. Cut to now, and the recovery has underwhelmed. In fact, just earlier today, the International Monetary Fund (IMF) cut forecasts for global economic growth in 2022. But, I still believe that there is an opportunity in the UK’s stock markets. In particular, in FTSE 250 stocks.

UK’s fast relative growth

Let me explain. According to the IMF, all advanced economies could see slower annual growth now, save Japan, whose growth is forecast to increase by a small 0.1 percentage point. But even after this reduction, the UK has the fastest growth among this group of economies, with the exception of Spain. Spain’s growth is forecast at 5.8% while the UK’s growth is seen to be at 4.7%. The next fastest growing advanced economies are Canada and the US at 4.1% and 4%, respectively, which are at a significant distance. There is no other European economy that has a 4%+ growth forecast. After the UK comes the German economy, at a rate of 3.9%. 

Focus on FTSE 250 stocks

My point is, that the second-fastest growth expected among European countries is the UK, reflects well on the potential for companies here. FTSE 100 companies are typically globalised multinationals, but the next biggest publicly listed companies, which are covered under the FTSE 250 index, are more UK-market-centric. Continued robust growth is an encouraging sign to me for their prospects.

Note that the comparison with other economies is essential, because stock market performance in any year is relative. Even if the UK were growing at half the rate, if the other economies were growing even slower, it would still have a comparative advantage. And that could make a difference to the investment funds allocated to it. 

My investment portfolio

And indeed, plenty of FTSE 250 stocks look promising to me. I hold seven of the index’s components in my own investment portfolio. These include recovery stocks that I expect to pick up this year, like Cineworld, easyJet, and National Express. But I also bought on dip those that performed well last year and that I expect to make gains over time. These include the likes of investment platform CMC Markets and iron ore miner Ferrexpo. The returns on these have been mixed so far for me, depending essentially on when I bought these stocks. But as I look at their stock prices today, every single one of them is seeing rising prices, which is heartening. 

What I’d do

This could change of course. Stock market are still uncertain. Another coronavirus variant could derail the recovery. So could ever-rising inflation. And I expect mounting government debt to be a challenge in this year too. Still, I think we have a whole lot to look forward to. Growth is still expected to be robust. And FTSE 250 companies are still reporting positive results. There are plenty of stocks I like and am happy to buy from the index now. 

Manika Premsingh owns CMC Markets, Cineworld Group, Ferrexpo, and National Express Group. The Motley Fool UK has no position in any of the shares mentioned. 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.

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