CORRECTION: This article previously said sellers pay Rightmove to list properties; it has now been corrected to reflect that estate agents list on the portal, rather than individual sellers.
The FTSE 100 contains the top 100 stocks in terms of market capitalisation. Many are long-established companies that have been around the block plenty of times, with strong, steady, predictable cash flows. You won’t find speculative gold miners or oil exploration drillers here. Some of the world’s best known brands and companies show up instead — and for good reason. They’ve all made investors money along their journey. So if the markets see a dip on a possible Labour election victory or a later potentially hard Brexit, I will be looking for such safe havens.
Rightmove (LSE: RMV) listed in 2006 and has since generated over a 15x return for its investors at the current price. It’s a scalable online platform where estate agents pay Rightmove to list properties that in turn attract consumers. The more properties that are listed, the more consumers will sign up to the platform. The more consumers who sign up to the platform, the more attractive it becomes for agents! It’s a glorious network cycle for the business. Its marketing spend is effective and this can be seen in the company’s triple-digit percentage return on capital employed (ROCE).
Rightmove is a fantastically profitable company, and while as a small-cap growth investor I wouldn’t usually buy it, there’s a good chance the stock price could be much higher in a year so it’s on my watchlist.
One big risk of Rightmove is that competitors appear and take market share. But the company is in a position that it can squeeze out competitors by reducing costs. The business is in a market dominating position, and it will take some serious competition to knock it off its perch.
Chances are you use one of this company’s products on a daily basis. The business is a fast moving consumer goods (FMCG) mega-giant and some of its most famous brands include Axe, Dove, Magnum, Surf, Knorr... the list is almost endless. It’s a giant that operates globally with its products sold in almost every country around the world.
It’s a consistently profitable business, and pays out regular dividends to its investors. It’s also a defensive company — in a recession or a crash, are people going to stop going to the shops to buy essential products and branded favourites? Sure, they’ll buy less of the more luxurious brands, but people are always going to be washing themselves in a recession. Regardless of which brand they choose — they’re definitely not going to stop buying soap.
Unilever is not going to make you rich if you buy today, but over the long term, I think it’s worth considering if you’re looking for a solid stock that provides a steady income. Unlike other FTSE 100 companies such as BP or Royal Dutch Shell, its earnings aren’t tied to a commodity price and so big fluctuations in profits are not going to occur. If you remember back in 2015 in the oil crisis, shares in oil companies and miners dived. For income investors, that’s not the sort of volatility we want.
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Michael Taylor does not own shares in Rightmove or Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Rightmove. 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.
Motley Fool UK 2019