No Moss

Diageo: The Coca-Cola of the Alcoholic Beverage Industry?

Good comments on Diageo. You capture the essence of Diageo, that is, unmatched stable of brands and unmatched scale of marketing and distribution. The marketing leverage comes from the fact that their marketing and distribution infrastructure is scalable, that is, it doesn't add a lot of expense to take on another brand. You can see the benefit to Diageo and the mannufacturing company in their recent agreement with Grand Marnier.

You can see a direct relationship between Diageo and the British Pound. Intuitively, the stock should benefit from the fall of the British pound in the last year (and vice versa for its recent rise). However, the stock is widely held internationally, so in fact it seems to fall on the Pound's weakness and rise on its strength.

Try comparing a chart of the British Pound to the price of the stock over the last year.

You don't mention how you arrived at the value of $64. I'd be surprised if the stock remained in the sixties once the growth in volume resumes, and I expect that to be the case this year (fiscal year ending June 30th, 2010). You have to remember that fiscal year 2009 coincided with the worst recession in modern memory.

You might want to check the spelling of Ketel One.

Diageo: Better Trading Opportunities Abound Elsewhere

Good point about the currency fluctuations. The British pound has been on a wild ride in the past year from $2.00 to $1.40 back to $1.65, which is something like the normal level.

You might also point out that the movement of the stock in the last year traces the movement of the pound, i.e., down a ton and back up about 20%.

Long-term, this is a great investment. They have an unparalleled lock on the world's best liquor brands, and they have a distribution channel that is unmatched. And these two things are scalable, that is, they can add new brands and volume without too much of an increase in cost.

Their recent forecast didn't offer much hope, but I'd say they'll be beating their forecast of low single digits. Why? Well, the worst 12 months of the last 70 years are behind us, and they increased their profits in that period (even net of currency fluctuatons).

Be Like Buffett: Get Off the Roller Coaster

Curbs-In and I disagree on the idea of brands. Brands like Gillette or Johnny Walker are virtually impossible to replace or displace. In the case of Gillette, they have virtually no competition and are able to charge premium prices for their top-end products. Getting and keeping shelf space is easy to do for a proven seller, and difficult to do for a beginning product.

GE's main problem, to nobody's surprise, is that it's vulnerable to the credit crisis and to the real estate market. Secondarily, it's vulnerable to a worldwide slowdown. I wish I hadn't bought it, but at $22 and change it's on sale. AAA rating, solid businesses, and sufficient income to at least maintain the dividend and work through the crisis. I don't see what's not to like with GE at this price.

Be Like Buffett: Get Off the Roller Coaster

I would generally agree. Diageo has been down ever since I bought it last year (at $87), but I have hopes it will rise at some point. Like GE, from $37 to the low twenties. I think these are both solid buying opportunities. GE in particular will come roaring back when it gets over the credit crisis.