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.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 2 The secret report that helps Israel hide facts
- 3 Is Ebola coming to Britain? UK health officials issue warning to doctors as outbreak fears grow
- 4 Richard Dawkins says 'date rape is bad, stranger rape is worse' on Twitter
- 5 Danish TV reporter is all business up top, all party down below
The secret report that helps Israel hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
- < Previous
- Next >
iJobs Money & Business
£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...
£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...
£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...
£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...
Day In a Page
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000