Beer Loses Fizz as Spirits Gain Popularity: Top 10 Stocks to Buy

4. Diageo plc (NYSE:DEO)

Number of Hedge Fund Investors  in Q1 2024: 30

Diageo plc (NYSE:DEO) is another diversified alcohol company that operates in both the spirits and the beer industry. This allows it a nimble business model which can adapt to the growth in either industry. Additionally, the firm is also keeping an eye on the RTD sector’s growth, and it announced a new RTD lineup in October 2023 and expanded it to the UK earlier this year. Like other large alcohol stocks, Diageo plc (NYSE:DEO) benefits from its strong brand recognition and enjoys a special place due to its well known vodka and spirit brands like Smirnoff and Johnnie Walker. At the same time, since it operates primarily in the premium market, Diageo plc (NYSE:DEO)’s stock is vulnerable to economic headwinds and primarily inflation. Conversely, the shares can benefit if investors perceive the economic outlook is improving, and Diageo plc (NYSE:DEO) also benefits from a stock market share in emerging markets. These can provide it with more room to grow in the future due to economic growth in these countries.

Argosy Investors mentioned Diageo plc (NYSE:DEO) in its Q2 2024 investor letter. Here is what the firm said:

“Diageo (DEO) was likewise added to the portfolio this quarter. We don’t believe we have any special insight into this well-known spirits maker, but believe DEO is capable of providing long- term attractive returns and became priced at a level where we felt we were taking less risk in the short term as well. Owner and marketer of the Johnnie Walker Scotch, Tanqueray gin, Smirnoff vodka, Guinness beer, and Baileys liqueur brands, plus a stable of emerging brands, Diageo is a fixture any time alcohol is being served. We believe we’re paying a high-teens multiple of quite stable and growing earnings, and benefit from a healthy 3% dividend in the interim. We won’t wow anyone with our analysis on this one, but when everyone else is rushing to buy Nvidia, our exposure to alcohol should help with any hangovers in the rest of the market.”