And now for something completely different …..
Reading today’s (1st Feb) news in the Daily Mail’s award-winning money pages, I came across an article by Alex Brummer entitled ‘Home is where the gin is.’ Not surprisingly, I had to read it as I do enjoy a bit of share dabbling – not much, but just for a little fun.
He cites Diageo (DGE) as a reasonably safe punt, and that it hasn’t peaked yet; the drinks giant’s success being down to its willingness to ditch lesser performing brands and focus on luxury, as well as holding a ‘top shelf portfolio’ (that’s beverages not men’s magazines).
“The gin craze in Britain and Europe, together with surging demand for premium whisky in China, India and across the world, allowed Diageo to shoot out the lights in 2018” Alex Brummer
Hargreaves Lansdown pointed out that another advantage of Diageo’s huge portfolio is that it can simply switch on other parts of the collection when spirit trends change. Tequilas and gins are current flavours of the month – but these still only account for a small percentage of overall sales.
Although the shares currently offer a prospective dividend return of 2.6%, “the group looks well placed to exceed its target to add 1.75 percentage points to operating margin over the three years to June 2019” according to HL; although not massive, perhaps a reasonably safe bet.
“DGE’s two largest categories, Scotch and Vodka, both delivered healthy sales growth – 7% and 3% respectively. Gin and Tequila both delivered spectacular growth, but only account for a combined 7% of sales” HL
While the Eurozone is stagnating and the trade war between China and the US has hit sectors such as our motor industry, the appetite for gin internationally seems to be bucking the global economic slowdown.
