7) Diageo plc (NYSE:DEO)
Number of Hedge Fund Holders: 31
Headquartered in London, the United Kingdom, Diageo plc (NYSE:DEO) is engaged in the production, marketing, and sale of alcoholic beverages.
Diageo plc (NYSE:DEO)’s competitive advantages stem from intangible assets, which create significant barriers to entry in some of its biggest categories. The cornerstone of the company’s evolving strategy revolves around pivoting away from its ‘affordable luxury’ narrative towards a more conventional staples business model. This transition is expected to lead to a more conservative but potentially more stable growth trajectory for Diageo plc (NYSE:DEO).
Its vast array of premium brands offers a solid foundation for strategic realignment, potentially providing a buffer against market volatility associated with luxury goods. Diageo plc (NYSE:DEO)’s ability to leverage its premium brand portfolio, such as Johnnie Walker, throughout various international markets places it well within the industry.
The transition towards a staples business model demonstrates that Diageo plc (NYSE:DEO) has been adapting to broader industry trends, favoring stability and consistent performance over the potential volatility of luxury markets. The transition is also expected to result in more consistent revenue streams and smoother earnings growth over time. Through leveraging the strong brand portfolio and global distribution network, Diageo plc (NYSE:DEO) can find opportunities to roll out more accessible product lines or bring innovation to the “everyday luxury” segment.
As per Wall Street, the shares of Diageo plc (NYSE:DEO) have an average price target of $147.00. Aristotle Capital Management, LLC, an investment management company, released its third-quarter 2024 investor letter. Here is what the fund said:
“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)
