Private Investor: Bingeing on booze is bad for you - but it's good for profits
Saturday 15 January 2005
Just my luck. No sooner than I do the sensible thing and buy into
Diageo, a nice steady share with reasonable prospects for capital growth and dividends, than a German broker goes and disses the company.
Just my luck. No sooner than I do the sensible thing and buy into Diageo, a nice steady share with reasonable prospects for capital growth and dividends, than a German broker goes and disses the company. Actually, I don't have anything against German brokers as opposed to any other kind of brokers. No, what has got my goat is the decision to downgrade Diageo from "add" to "hold".
The broker's notion is that the shares are due to stall, that the re-rating of drinks companies and their outperformance of the wider market is now at an end, and that next month's first-half results will be the point at which to take stock of the future of Johnnie Walker, Guinness and Smirnoff sales.
While Dresdner Kleinwort Wasserstein believes that trading in America remains buoyant, it also thinks evidence of US market share gains remains uncertain. It is also sceptical about margin growth, with lower spending on advertising and marketing. So I bought Diageo at about 750p and the next day it slipped by 10p. No great shakes in the big scheme of things, but it is remarkable that a review by one broker, no matter how well respected, can move a company's shares quite so decisively. I suppose it explains why "investor relations" are so important and why financial public relations seems to be such a lucrative trade. But it also seems like a very short-term perspective. I know someone of my age and weariness ought not to be shocked or perturbed by this sort of thing, but I do wonder.
In any case, I'm quite content about my renewed interest in Diageo, which I had pretty much sold out of, after a long bull run and some excellent dividend performance. Over a period of some years, I had opted for Diageo's dividend reinvestment plan and I was well rewarded. I wrote last week about how well an investment in human vice can reward the average investor; and while I agree with the Dresdner brokers that the long bull run has probably petered out, I would have thought that Diageo still had steady prospects.
For some investors, steady stock is not the thing they need at all: those with an unusual appetite for risk, or the few who want to get going in their twenties or thirties, say, who would be wise to focus on long-term capital growth rather than on income.
For myself, I needed to balance some adventurous punting with something more reliable. By the way the nuttiest of those, Matrix Communications, has slipped back a little after its recent extraordinary run (up 50 per cent in a month or so). Even so my drinking partner, who alerted me to its potential and has put what I consider to be a rash figure into the shares, has added to his holding. He has nerves of steel. I needed a drink after all that excitement.
Anyway, back to the story. The best short-term boost for Diageo is the growth in the drinks market, and here there are at least two good signs, as far as the UK market is concerned. First, there is the imposition of the smoking ban on pubs which might well increase the off-licence trade, as people buy to consume at home. Then, and more powerfully, there is the prospect of liberalisation of the UK's licensing laws. Personally, I don't buy the idea that when the licensing hours change, we'll all turn into moderate Continental-style drinkers, complete with café culture and Left Bank intellectuals.
No, what will almost certainly happen is that the normal three-hour British binge drinking session will be stretched into a five- or six-hour marathon, with all the predictable consequences that will have for anti social behaviour, policing and the state of our city centre pavements on a Sunday morning.
But one's personal prejudice should rarely stand in the way of making a good profit, so Diageo joins Scottish and Newcastle, Sportingbet, McDon- alds and Shell in your investor's unethical portfolio. And before you ask, I did give money to the tsunami appeal.
Money roundup video: It's getting harder to sort out a mortgage
Women born in 1950s facing severe financial hardship over pensions could have fates changed by Ros Altmann - should she choose to help
Five Questions On: GB Energy's new tariff
Simon Read: You're guilty until proven innocent when HMRC sends in the tax credit detectives
How to start your own internet business
- 1 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 3 School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
- 5 Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...
Day In a Page
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away