Diageo PLC (DEO)

Used to be growth-by-acquisition, but by now it's acquired most of the high-quality franchises. Turning point was when it couldn't acquire the Beckmann family tequila brand, and then it just became all about cost savings. Young people aren't drinking. Probably time to sell.

For the same type of underlying safety and dividend growth, take a look at Nestle or PG or UL.

The liquor stocks are spiralling down. Diageo yesterday reported results so horribly that they cut their dividend in half. Shares fell 15% in one session. Younger people are drinking less. GLP-1 is reducing the drinking crave. Consumers feel the pinch from inflation. And cannabis is competing. DEO's Agave sales fell 23% due to a New York lawsuit, he thinks. He suggests the liquor companies roll back prices and accept lower profits.

People are drinking less, but drinking better. Focused on premium brands. Volume growth has been minimal to non-existent. New CEO turned around Tesco in the UK. Expects some improvement, thinks earnings have bottomed. Turnaround in strategy can't happen overnight. Pretty safe from here. Trades at 14x PE. Yield is 4.3%.

Pays a safe 5.6% dividend, but their lines of business are not doing well.

They face the health issues over alcohol, so younger people are cutting back. Also, had distribution issues and recently change the CEO. Expects them to focus more on premium brands. They are best in class in premium alcohol.

World's largest spirits producer, great brands. In the West, the growth strategy is to push premium price points. In the rest of the world, it's to push volume. 19 of the top 20 liquor brands selling today were born 100 years ago, so liquor brands have longevity. The stock to own in the sector. Yield is 3.21%.

Largest producer in the world, focused on premium brands. Stock's at 10-year low. Post-Covid revenues have flattened out, but earnings poised to rise. Wall Street's not enamoured with management, but the company can afford to hire the best -- there are rumblings, though no action yet. Cheap valuation of 16x PE. Looking for a return to 7-10% earnings growth. Hoping the stock will be a double over 5 years. Yield is 2.87%.

Things have slowed down in Latin America. Some brands have underperformed. Lots of articles on how alcohol might not be great for you. People may be drinking less, but they're drinking "better". Consumers tend to return to behaviours over time. (The big trans fat scare of 25 years ago has not stopped people from eating french fries.)

Was upgraded yesterday, surprisingly, based on expected more sales in spirits, and a cyclical, not structural decline in alcohol. Watch for DEO's guidance in February, their next report.

If you look at the June numbers, sales were down and volumes were down in a lot of places around the world. So spirits are doing very poorly, and it's a higher-priced product. Margin compression. Expectations of 5-7% growth for the second half is over-optimistic.

Needs to restructure into fewer brands. Big issue is that it's not growing as fast as it used to, nor does it have pricing power anymore. Management shakeup has hurt. Stock's fallen a lot, so you could try a value play if you're prepared to hold for a long time.

Very well managed. Had volume, pricing and inventory issues. Overwhelming healthy messages from government to limit intake. Younger generation doesn't drink as much as older ones. Not expensive, a lot of the negatives are priced in. Yield is just over 4%.

Take a look. Nice, conservative name to own. Potentially undervalued, and could turn around.

The high-end boozemaker is out of touch with the American consumer who is struggling. DEO's top tequila brand used to boast super growth, but is now -22% in the past year; not they have slashed the price of that tequila to adjust.

Sales are slipping and their dividend isn't growing despite being a mature company. LVMH offers far better dividend growth, for example.

He's added at lower levels, a great opportunity. Best in the world at what they do. Sales have been soft, but they have so many of the top brands in the world. When someone like George Clooney comes out with a brand, they buy it and bring it into the distribution network. Will raise dividend and generate earnings growth for many years. Yields around 3%.

Disappointing earnings. Hurt in Latin America. General slowing, including US. Core holding. Great company, trades at 19x earnings. 2.8% dividend yield, steady growth over time. Share buybacks. Growth of India's middle class will be a huge driver.