1. Diageo plc (NYSE:DEO)
Short % of Shares Outstanding: 0.12%
With a short percentage of only 0.12%, Diageo plc (NYSE:DEO) tops our list of the Best Alcohol Stocks to Buy According to Short Sellers. Diageo is a British multinational alcoholic beverage giant with over 200 brands and sales in nearly 180 countries. The company’s competitive edge stems from the sheer breadth across its portfolio and extensive geographical footprint, providing it with a solid foundation for strategic realignment and a strong buffer against market volatility associated with luxury goods.
Diageo plc (NYSE:DEO) has recently been divesting assets as part of its strategic portfolio management, pivoting away from its ‘affordable luxury’ narrative towards a more conventional staples business model. The company agreed to sell Pampero rum and Safari flavored liqueur last year and is now also considering the sale of Cîroc Vodka, a brand previously associated with music mogul Sean “Diddy” Combs. Though net sales of the brand fell 28% in the fiscal year 2024, its strong presence in nightclubs could attract certain bidders who see turnaround potential.
Diageo plc (NYSE:DEO) boasts some of the Best-Selling Scotch Whisky Brands in the World, including Johnnie Walker, in its portfolio and holds a commanding 39% market share in the segment. The company owns almost half of all the Scotch whiskey stock currently in the maturing stage, which represents a position that is impossible to replicate by competitors. Diageo plc (NYSE:DEO)’s beer business also seems to be faring well and the demand for its iconic Irish stout, Guinness, has boomed over the past 18 months, driven by younger drinkers and women. Diageo’s beer business delivered 14% organic net sales growth in fiscal year 2024, driven primarily by the continued momentum of Guinness.
Diageo plc (NYSE:DEO) also maintains a progressive dividend policy and has continuously increased its dividend for the last 25 years. The company stood up to its reputation as a very reliable dividend payer and increased its full-year dividend by 5% in FY 2024.
However, Diageo plc (NYSE:DEO) could also become a victim of President-elect Donald Trump’s rumored 25% tariffs on imports from Mexico, as the spirit giant’s subsidiaries shipped over 25 million liters of tequila to the US from its southern neighbor last year, including brands such as Don Julio and Casamigos. That said, Diageo has decades of experience navigating trade policy and has always taken trade disputes in its stride.
Aristotle Capital Management, LLC, an investment management company, said the following about DEO in its Q3 2024 investment letter:
“Headquartered in London, England, Diageo plc (NYSE:DEO) is a global leader in the alcoholic beverages industry. The company has a vast portfolio of over 200 well-recognized premium spirits (~80% of FY 2024 sales), beers (~15% and mostly Guinness) and other beverages (~5%) that are sold in nearly 180 countries. Led by its Johnnie Walker brand, Diageo is the world’s largest exporter of Scotch whiskey—its largest category at ~25% of sales—followed by other spirits such as tequila and vodka (~10% each). Diageo also owns a ~34% stake in the premium champagne and cognac maker Moët Hennessy (a subsidiary of LVMH Moët Hennessy Louis Vuitton).
The company is the product of the 1997 merger between Grand Metropolitan and Guinness and the subsequent divestiture of its food-related businesses. M&A continues to be a part of Diageo’s strategy, as regional brands often dominate local markets (which provides further opportunities for mergers and industry consolidation). Over the last decade, Diageo has also meaningfully increased its presence in the rapidly growing tequila market with the acquisitions of Don Julio and Casamigos…” (Click here to read the full text).
Overall, Diageo plc (NYSE:DEO) ranks first on our list of the best alcohol stocks according to short sellers. While we acknowledge the potential for DEO to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DEO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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