Should I sell DIAGEO?


Today, the markets is quite boring with the $SPX500 around the same value it was yesterday. As for my portfolio, we are doing much better thanks to $MUV2.DE and $FB mainly which are doing great today.

$DGE is the largest alcohol distiller in the Western World owning brands such as Guinness, Smirnoff, Captain Morgan, Johnnie Walker, 37% of Moet & Chandon(the rest is owned by $MC.PA ) and many other premium brands. Consumer habits are changing and people are drinking less and less cheap alcohol(such as beer) and focusing on premium products. And Diageo has a a wide portfolio of these premium brands. The number one competitor of Diageo is $BUD which owns mostly beer brands, so Diageo is well positioned to maintain its leadership in the industry. The company currently has over 12 Billions GBP of intangible assets, which is 3 times that of all the plants and other real estate that they own. The real strength of Diageo is these premium alcohol brands.

Most stocks worldwide are going to be affected by Brexit but Diageo, a little more. The company is headquartered in the UK with many distilleries in Europe and mainly in Ireland, so the UK being out of the EU will have some adverse effects on the business. Now, let's talk about the positives, Diageo is a British exporter, actually the 9th largest exporter in the UK and any exporter prefers to have a weak home currency. And Brexit have really weakened the $GBPUSD . Another reason why Diageo may profit from Brexit is that the alcohol and tobacco industry is the second largest export industry of the UK(after oil and gas mainly because of $BP.L and $RDS.B ). Within the EU, tobacco and beverages industry is highly regulated with huge taxes on the goods. The British government might be more lenient on them. Of course, all of this depends on which types of deals the UK makes with the EU.

Even if we ignore Brexit, Diageo is a company which always makes money. Happy people drink alcohol because they are happy, sad people drink alcohol because they are sad.

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