Diageo plc (ADR) (DEO)

theskyiscrape (55.12) Submitted: 3/16/07 7:09 PM : Start Price: $71.92 DEO Score: 14.37

I have recently acquired shares in this company, after a long wait for a downturn that never seemed to be coming. To me, this seems like a great stock to own regardless of the economic conditions, locally or globally. People almost universally like to drink, whether socially to relieve inhibitions or daily as an escape from their problems (such as a bursting of the sub-prime mortgage market and subsequent decline in home values) . I am especially pleased with the high-end line of spirits they offer, which will appeal to baby-boomers for many years to come. Also, their growth into China looks very promising, as they seem to be taking very well to the high-end Johnnie Walker (34% market share of all whiskey in China) whiskey. With the possible acquisition of Absolut, this will increase Diageo's market share of premium vodka's, complementing the ever-popular Smirnoff label. The one downside I see is their strong leverage with debt, with a debt/equity ratio of 1.34. However, so long as their cash flow remains strong, which is almost a certain guarantee, this debt can be managed. With an accompanying dividend yield of approximately 3%, this stock should see steady growth for many years.

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