"If you’re buying stocks for long-term investment goals, now is an excellent time for some bargain hunting," says Alex Green. In The Oxford Communique he "toasts" Diageo (NYSE: DEO).
"One good place to start is with Diageo . We like the outlook for company, which is the world’s largest spirit maker. In good times or bad, people drink. According to some studies, even more during the bad times.
"With eight of the top 20 brands, and unparalleled marketing and distribution operations, Diageo is the best way to tap into the globe’s steady demand for high-quality spirits. Sales rose 18% in the first half of the current fiscal year, while earnings increased 21%. In this market, that’s solid.
"And while the company reduced expectations for the full year, I think earnings for this British firm will come in ahead of expectations.
"Why? For one, the bulk of Diageo’s sales come from outside the United Kingdom. With the pound getting pounded, earnings will get a nice boost on currency translation alone.
"Second, Diageo is responding quickly to the current environment. It announced a restructuring plan to help cut costs. But it’s not cutting back on marketing to improve and build brand awareness.
"Third, the company is still attacking growth in emerging markets. Sales in Africa are expanding at twice the rate as North America. Plus, the company’s getting nice traction in Korea, India, China and Latin America.
"Longer term, two other macro trends play right into Diageo’s hands – an increasing population of legal-age drinkers and the over-55 group’s affinity for high-end spirits. Together, these trends mean more demand. Keep buying."
