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It is not easy to find a place in the area FTSE 100. Companies that do so are usually well established and unlikely to fail.
My portfolio consists mainly of companies from the index – strong growth stocks and reliable dividend stocks. Unlike small volatile stocks, they don't demand a lot of my attention. I rarely check them, I trust that they will maintain stability and growth in the long run.
However, there is one stock that drags down all my returns. I've been hoping for it for a while but my patience is running out. With losses of nearly 25% over the past year, I wonder if it's time to admit defeat.
Let's consider its prospects.
Hangover care
Did someone ask two years ago what my three favorite stocks were, the soft drink giant Diageo (LSE: DGE) could be one of them. But from August 2022, the Smirnoff again Guinness the manufacturer declined, losing more than a third of its value.
Even a 3% dividend yield does little to relieve the hangover from these losses.
Most of them are due to reduced sales in Latin America and the Caribbean (LAC), where the ongoing effects of Covid have damaged the economy. Cash-strapped consumers opting for less expensive alternatives seem to be abandoning their popular brands. But with inflation falling and the economy improving, I expected recovery this year.
No such luck
In its July earnings results, sales fell for the first time since 2020. Despite an 8.2% increase in reported operating profit, the share price still fell 10% on the day. The situation is so dire, that analysts are starting to doubt that Diageo could be a takeover target.
Despite the decline, it still commands a 75% share of sales in measured markets, with growth in many regions. With losses so concentrated in the LAC region, even a small recovery there could turn things around. Profits are forecast to continue to decline until mid-2025 and then recover until 2026.
Not alone
Diageo is the tenth largest company in the FTSE 100 and it's no wonder why – the company controls a large share of the international alcohol market. With a large brand portfolio including Johnny Walker, J&B, Seagram's, Don Julio, Tanqueray, again Bell'sit's hard to go a day without seeing its products on the shelves.
One of its biggest competitors Brown-Formanthe US is drinking the bully behind Jack Daniel's Whiskey again Herradura tequila. It had an even worse year, down 35%. How about the famous French dress Pernod Ricard? Same result – 32% drop.
Adapting to change
This suggests an overall decline in alcohol consumption worldwide. The survey finds a change in drinking habits among younger generations, where low-alcohol and non-alcoholic brands are more popular.
Why do I feel that this has all happened before?
Because he went. About twenty years ago, cigarettes fell out of fashion and vapes began to take over. But after 20 years, British American cigars still going strong. By working with regulators and adapting to changing conditions, it has managed to survive.
I hope Diageo takes notice, and soon. If not, I may have to break one of my cardinal rules and sell shares at a loss.
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