Artisan Partners, an investment management company, released its “Artisan Value Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. US markets narrowed in Q2 after broad market activity that drove US stocks higher in late 2023 and early 2024, with a few mega-cap technology names lifting the S&P 500® Index to all-time highs on the AI FOMO. The fund’s Investor Class ARTLX, Advisor Class APDLX, and Institutional Class APHLX returned -2.41%, -2.36%, and -2.36% respectively, in the second quarter compared to -2.17% return for the Russell 1000 Value Index. The positive stock selection in the consumer discretionary and communication services sectors offset the underperformance in the industrials and consumer staples sectors in the second quarter. In addition, you can check the top 5 holdings of the strategy to know its best picks in 2024.
Artisan Value Fund highlighted stocks like Diageo plc (NYSE:DEO) in the second quarter 2024 investor letter. Diageo plc (NYSE:DEO) engages in the production and distribution of alcoholic beverages. The one-month return of Diageo plc (NYSE:DEO) was 5.35%, and its shares lost 19.37% of their value over the last 52 weeks. On September 4, 2024, Diageo plc (NYSE:DEO) stock closed at $129.41 per share with a market capitalization of $71.91 billion.
Artisan Value Fund stated the following regarding Diageo plc (NYSE:DEO) in its Q2 2024 investor letter:
“In the industrials and consumer staples sectors, Airbus and Diageo plc (NYSE:DEO) were key detractors. Diageo is the largest spirits company in the world by revenue, with over 200 brands to choose from. Shares have remained under pressure since our initial purchase in December 2023, when the stock was already trading at multiyear trough multiples. More than half of its operating profits come from North America where sales have been sluggish, while sales have been especially weak in Latin America and the Caribbean. Growth is normalizing after a COVID-induced bounce, and consumers have been trading down to cheaper value alternatives, which is a headwind for Diageo’s premium brands. 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. The secular concerns hanging over the stock are a potential generational shift away from alcoholic beverages and the rise of GLP-1 weight-loss drugs that may also reduce the desire for alcohol, sugar and snacks. The first set of issues appear fixable, and we believe they should prove temporary. In the near term, margin expansion will likely be constrained, but the company generates meaningful free cash flow (FCF) 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. With regard to the secular concerns, the evidence is mixed. The potential health benefits of GLP-1s are tremendous, but we are unconvinced that these drugs will change broad consumption habits in a sustainable manner. Ultimately, we believe Diageo is a high-quality compounder caught in a bad narrative cycle.”
A close-up of bottles of whisky and other alcoholic beverages from a winery.
Diageo plc (NYSE:DEO) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held Diageo plc (NYSE:DEO) at the end of the second quarter which was 30 in the previous quarter. While we acknowledge the potential of Diageo plc (NYSE:DEO) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Diageo plc (NYSE:DEO) and shared the list of best alcohol stocks to own according to hedge funds. Artisan Value Fund purchased Diageo plc (NYSE:DEO) during Q4 2023. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.