One Fool puts Diageo plc (LON:DGE) onto his watchlist.
As the New Year begins, I have been looking for new shares to invest buy -- and one that's caught my eye is Diageo (LSE: DGE) (NYSE: DEO.US). So, for the rest of the year -- along with Associated British Foods and Vodafone -- I will be following the company's performance and conducting further research into its news and results.
Diageo is another FTSE 100 share considered 'defensive'. The theory follows that if consumers are saving money by cutting down on going out for drinks, they'll buy in replacements for what they would have drunk -- after all, a bottle of Johnnie Walker bought from an off licence or supermarket is going to be far cheaper over time than what you'd pay for individual drinks amounting to the same quantity in a pub.
The same goes for Crown Royal, J&B, Windsor, Buchanan's and Bushmills whiskies, Smirnoff, Ciroc and Ketel One vodkas, and Baileys, Captain Morgan, Jose Cuervo, Tanqueray and Guinness -- all brands within Diageo's portfolio. Whatever your tipple, Diageo seems to have you covered.
Now, if the market takes off on a bull run then defensive shares often suffer. The Footsie has begun 2013 strongly, surpassing the 6,000-point level and currently hovering around 6,100. So why am I still interested in a defensive share like Diageo?
Well, just because the year has started well, unfortunately doesn't mean it's going to stay that way!
The market is easily affected by political events around the world: the eurozone problems haven't exactly been tied up with a little bow on top yet; the United States has admitted it is close to hitting the 'debt ceiling'; there are ongoing ructions in the Middle East; and here in the UK, our AAA status is under "significant pressure" according to the Fitch rating agency, leaving us vulnerable to economic impacts across the world.
So call me a pessimist, but just don't call me bearish -- here at the Fool, we're always bullish on the stock market. Unlike cigarettes, another industry considered a vice, alcohol isn't under attack from all angles of society and in danger of a major drop-off in profits.
Yes, there are campaigns against drink-driving and binge-boozing, but these adverts and others are oft-accompanied with a 'Please drink responsibly' banner -- it's a warning not to overindulge, not a persuasive attempt to quit altogether. Although laws have been passed recently banning tobacco displays in supermarkets, shelves of everything from whiskey to wine remain prominent.
I'll delve into Diageo's figures more closely in later articles, but the shares in the company have more than doubled in the last five years -- reaching a low of 733p back in 2009 and ending 2012 on 1,787p as at 31 December -- and risen more than 165% in the last decade.
At the time of writing, they can currently be found trading for 1,804p -- potentially presenting a buying opportunity. Diageo's performance against the FTSE has been enough to convince me to invest in a small holding, and I shall carefully monitor the company across 2013 to see if it warrants further investment...
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> Sam owns shares in Diageo.