"Chewie here tells me you're looking for passage to the Alderaan system."
January 15, 2012
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RELATED TICKERS: DEO
I went to college in a tiny, rural town where I often lamented, "If there's a bright center to the universe, this is the town that it's furthest from." Many an evening was spent in a dark, subterranean hole-in-the-wall that my friends and I liked to call "the Cellar". Upstairs you could occasionally see a local band playing, but I mostly stayed downstairs where one would find a colorful cast of folks, but you definitely had to watch your step. This place could get a little rough. Despite the town's remote location the bar's less-than-friendly patrons, the one thing I could always count on was Guinness on tap. Little did I know that the small comfort I enjoyed, a favorable brand at my local watering hole, is being exercised across all reaches of the globe. My stock pick for this month is international spirits juggernaut, Diageo (ADR) (NYSE:DEO).
This British spirits maker yields a 3% dividend, but at its current price Diageo isn't exactly a bargain – I've read analyses advising not to buy this stock above $80/share. But I am a buy-and-hold investor who thinks the price will ultimately go up and I love dividends so I prefer to own the stock and collect dividends rather than wait and hope that the price goes down to an arbitrary number before it continues to rise. If the price goes down, I'll buy more. My long-term positive outlook for Diageo is based on their stated goal of having 50% of their net sales be from emerging markets by 2015. Currently Diageo boasts eight of the world's top 20 liquor brands which they sell through a vast international distribution system throughout more than 180 countries. Emerging and developing markets, which account for about one-third of Diageo's revenue, posted double-digit growth for them in the past few years.
I've started contributing to the Motley Fool Blog Network where I've reposted this except I edited out the fun stuff and added my boring analysis. If you'd like to check it out, it's here. If you just want the exciting conclusion...
About ten years ago, Diageo divested itself of the local Indian whiskey Gilbey's Green Label, saying it wanted to focus on international brands. Recently Diageo has returned to the competitive whiskey market of India, marking a change from their previous strategy. Now they acquire local breweries and spirits manufacturers for the purpose of distributing their premium international brands but also to give regional and national labels new international exposure.
I should disclose that I have recently added to my long position in Diageo.
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