The last year has not been a particularly special one for shareholders of Diageo (LSE: DGE) (NYSE: DEO.US).
Indeed, while many of the constituents of the FTSE 100 had a fantastic 2013, Diageo’s share-price performance was rather lacklustre. Shares were never up more than 15% from where they started one year ago and, over the last 12 months, have delivered only a couple of percentage points of outperformance versus the FTSE 100, with much of that being over the last week as defensive stocks have outperformed a falling stock market.
This picture is a lot different to the one painted in previous years, when Diageo was enjoying continually higher reratings and shares were pushing on, making higher highs almost every month. Indeed, looking back at the last five years, shares in Diageo have outperformed the FTSE 100 by over 46%, again highlighting how disappointing the last year has been.
However, things could be on the up for investors in Diageo. As a long-term play, it still holds vast appeal, since it remains hugely focused on emerging markets. This is where much of the growth for consumer goods is likely to take place in future years and, although in recent weeks there have been doubts about the sustainability of the emerging market growth story, developing economies were never going to enjoy a smooth ride to more developed status.
In other words, it is inevitable that there will be some lumps and bumps along the journey from developing to developed nation. Therefore, the long-term outlook for stocks such as Diageo still looks positive.
In addition, Diageo does not appear to be overly exposed to one region, rather it is instead well diversified among the developed and developing parts of the world. Although this has meant it being exposed to the tortoise-like growth rate of Europe in recent years, it also means less risk for shareholders. Should one region (developed or developing) experience a challenging period, Diageo still has large exposure to other regions from which to generate sales and new customers.
This high degree of diversification, as well as a vast exposure to the emerging economies of the world, mean that Diageo could still be a great long-term play. In other words, it could help you to retire early.
