Shares of Unilever (UL 0.40%) rose as much as 10% on May 31. The gains follow news that the consumer staples giant has added Nelson Peltz to its board of directors. Although this isn't likely to change anything about the company right away, if history is any guide, it could lead to a positive outcome for shareholders.
Unilever has been struggling for a few years. Although it has an enviable portfolio of brands, including Dove and Hellman's, growth has lagged behind what many of the company's peers have been able to achieve. To be fair, there has been a lot going on at the company, including a change of corporate structure and the rise of a new CEO.
But based on the stock-price action over the recent past, investors seem to believe that there have been more missteps than successes. That came to a crescendo in early 2022, when news leaked that Unilever was looking to make a big acquisition.
Investors sent the stock sharply lower, giving a clear message to management that it was going in the wrong direction. This was highlighted by the fact that, after Unilever announced that it would abandon the effort, the stock rose sharply -- the very next day. And at about that same time, Nelson Peltz started to build a position in the company via his investment vehicle Trian Partners.
There's a precedent here, since Mr. Peltz publicly took on Unilever peer Procter & Gamble (PG -0.39%) several years ago. He was eventually added to P&G's board and helped to shape that company's turnaround effort. Procter & Gamble stock is up more than 60% since the proxy fight with Peltz about five years ago, and the company is putting up incredible results today, recently reporting organic growth of 10%, despite inflationary headwinds.
Investors are clearly hoping that Mr. Peltz can have the same type of impact on Unilever that he had on P&G.
The truth is that nothing is going to change overnight, so investors are pricing in a lot of good news that may or may not come to pass. However, with a seat on the board, notably including a role on the compensation committee, Peltz clearly will have a loud voice in Unilever's plans.
He has material experience working in the consumer staples space, as well, so it's hard to believe he'll make things worse. Perhaps the glass-half-full view that investors are taking today is the right one, even if the hoped-for turnaround takes some time to pan out.