10 Best Alcohol Stocks To Own According to Hedge Funds

6. Diageo plc (NYSE:DEO)

Number of Hedge Fund Holders: 31

Diageo plc (NYSE:DEO) is a British multinational alcoholic beverage company with its headquarters in London, England. With over 200 brands sold in more than 180 countries, Diageo is the Largest Spirits Company in the World. The company’s portfolio has remarkable breadth across spirits and beer, with brands such as Guinness, Captain Morgan, Johnnie Walker, and Smirnoff etc.

Net sales of the company declined by 1.4% in the fiscal year 2024 ending on the 30th of June, largely due to an unfavorable foreign exchange impact and organic net sales decline, partially offset by hyperinflation adjustments. However, good news came from the highly popular Guinness brand, which gained double-digit volume growth and was the primary driver of overall net beer sales growth of 18%. A major reason for this is that the Irish stout has gained popularity among younger consumers in recent years in part due to celebrity endorsements. Also, despite the challenges, the company generated a strong free cash flow of $2.6 billion in FY 2024, up $0.4 billion from the previous year. Overall, Diageo plc (NYSE:DEO) is still a resilient business, benefitting from its global reach and unrivaled brand portfolio. It is also a Great Alcohol Stock for Dividends, as the company stood up to its reputation as a very reliable dividend payer for decades and increased its full-year dividend by 5%, maintaining its track record of dividend increases since fiscal year 2000.

Artisan Value Fund, an investment management company, stated the following regarding Diageo plc (NYSE:DEO) in its Q4 2023 investor letter:

“Diageo is a global leader in alcoholic beverages with an impressive collection of brands across spirits and beers. The company’s portfolio of over 200 brands provides diversification and allows it to meet consumer trends. A key focus for growth has been premiumization, and today, Diageo’s portfolio is now more heavily weighted toward premium segments. Shares are trading at multiyear trough multiples on fears of growth normalizing after a COVID-induced bounce and premiumization headwinds as some markets are showing consumers trading down to value alternatives. In the near term, margin expansion will likely be constrained, but the company generates meaningful free cash flow and returns it to shareholders through dividends and share repurchases. Over the past five years, Diageo generated £12 billion FCF and returned £16 billion to shareholders. Although spirits are more cyclical than other staples, the company’s growth prospects are better long term, and we believe the current situation has provided us an attractive investment opportunity.”