Is Diageo a buy? Or should you avoid it? We give you our thoughts, what our analysts will do with Diageo and give you the reason(s) why the stock is dropping.
Very interesting. I’m really not a fan of Debra, Pernod seems better here given the valuation gap in my view. But both will work once the destocking ends
Thank you Greg. Time will tell if Debra is a good CEO for Diageo, but I can understand your preference for Pernod in terms of management. In my opinion, Diageo has stronger brands (also including their stake in LVMH spirits).
It all comes down to management. Poor capital allocation is a major red flag (prioritizing dividends and buybacks over de-leveraging the balance sheet is insane).
Putting a product and marketing person in the top job is a recipe for disaster. A CEO should have a corporate finance background, supported by strong product, marketing, and operations teams—not the other way around.
Sure, Crew has an MBA—but so what? An academic certificate doesn’t make a company great. Just ask Steve Jobs, Bill Gates, or Mark Zuckerberg.
Buffett always warns about large companies suffering from one or more of the ABC, 'arrogance, bureaucracy and complacency". The Debra Crew appointment looks like the company has become a management bureaucracy, perhaps driven by the other two.
The company is in a maelstrom of headwinds that show no sign of abating and without the right captain steering the ship, it doesn't look attractive - even after the share price drop.
Management is the single most important factor in any investment decision, and without top-tier leadership, the risk is simply too high.
Very interesting. I’m really not a fan of Debra, Pernod seems better here given the valuation gap in my view. But both will work once the destocking ends
Thank you Greg. Time will tell if Debra is a good CEO for Diageo, but I can understand your preference for Pernod in terms of management. In my opinion, Diageo has stronger brands (also including their stake in LVMH spirits).
That’s fair. Especially in Tequila they have amazing brands.
"Focus on companies riding long-term growth trends, and don’t compromise too much just because a stock looks cheap."
Thank you for this very important lesson
Glad you got something out of it!
It all comes down to management. Poor capital allocation is a major red flag (prioritizing dividends and buybacks over de-leveraging the balance sheet is insane).
Putting a product and marketing person in the top job is a recipe for disaster. A CEO should have a corporate finance background, supported by strong product, marketing, and operations teams—not the other way around.
Sure, Crew has an MBA—but so what? An academic certificate doesn’t make a company great. Just ask Steve Jobs, Bill Gates, or Mark Zuckerberg.
Buffett always warns about large companies suffering from one or more of the ABC, 'arrogance, bureaucracy and complacency". The Debra Crew appointment looks like the company has become a management bureaucracy, perhaps driven by the other two.
The company is in a maelstrom of headwinds that show no sign of abating and without the right captain steering the ship, it doesn't look attractive - even after the share price drop.
Management is the single most important factor in any investment decision, and without top-tier leadership, the risk is simply too high.
I couldn't agree more. Especially the ABC comes to mind with Diageo.
Fundsmith also recently exited their Diageo investment, preferring Brown Forman, which they still own: https://www.reuters.com/business/uks-fundsmith-says-it-shed-diageo-over-management-issues-weight-loss-drugs-2025-01-09/
Thanks! Brown-Forman is riskier in my opinion, given that it's less diversified (mainly whiskey category). Also huge weighting towards USA.