2021 proved to be a good year for the FTSE 100. London’s flagship index rallied by 14.3%, recovering the losses incurred since the Covid-19 pandemic caused global stock markets to crash in February 2020. However, the International Monetary Fund recently trimmed its growth forecast for the British economy, and fears of another stock market crash are rising.
Nonetheless, I continue to explore opportunities to add to my long-term portfolio. Let’s take a closer look at two shares on my watchlist.
A dividend stalwart
Unilever (LSE:ULVR), the consumer goods giant, has struggled somewhat of late. The stock posted a negative return for 2021, trailing the Footsie by a considerable margin. Last week the company announced restructuring plans to cut 1,500 management jobs globally. Could this mark a turning point for the dividend player’s fortunes?
The risks of investing in Unilever have been highlighted by Fundsmith’s Terry Smith, often dubbed ‘Britain’s Warren Buffett’. He admonished the group for “losing the plot” in its misguided focus on sustainability over profits. These remarks are pertinent in the current macroeconomic environment, with UK inflation running at a 30-year high of 5.4% pointing to heightened pressure on profit margins. In addition, Unilever recently suffered a brief but concerning 10% crash in its share price following an unsuccessful £50bn bid for GlaxoSmithKline’s consumer products division.
This defensive stock is one of the largest constituent members of the FTSE 100. Unilever boasts an enviable range of brands, from Dove soap to Marmite, and has responded to criticism with a new focus on five distinct product groups. Love it or hate it, if this strategy proves successful, Unilever has the resilience to weather potential storms ahead.
One advantage I see in the falling share price is the rising dividend yield, which currently stands just shy of 4%. This is higher than the historical five-year average of 3.15%. I am carefully monitoring Unilever, as this could be a golden opportunity to snap up shares with the dividend yield at an attractive level.
An Anglo-Swedish household name
AstraZeneca (LSE:AZN) has enjoyed enormous publicity over the past couple of years due to the development and distribution of its effective Covid-19 vaccine, AZD1222, which the company has recently started to take profits from.
This pharmaceutical heavyweight goes from strength to strength, outpacing the FTSE 100’s gains over the past year and currently trading at a whopping price-to-earnings (P/E) ratio of 93.94. The sky-high valuation could be a concern for investors, but AstraZeneca’s promising pipeline of medicines suggests strong future earnings growth.
Although the rapid spread of the milder Omicron variant has dented some forecasts for its Covid-19 vaccine sales, there is far more to AstraZeneca’s business. For instance, the company has launched more than a dozen Phase II and III clinical trials evaluating Immuno-Oncology and gene-targeted therapies in the early stages of lung cancer – the leading cause of cancer death worldwide.
AstraZeneca currently looks pricey but the stock is positioned to perform well in the long run. I regard any future dips in its share price as good buying opportunities for me.
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Charlie Carman 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.
