Yet again, US President Donald Trump has blown up financial markets, causing steep slumps in asset values. Share prices dived worldwide after the US attacked Iran on Saturday, 28 February. At its all-time high, the UK’s FTSE 100 index peaked at 10,934.94 points on Friday, 27 February. At its 2026 low, the Footsie plunged to 9,670.46 on Monday, 23 March. That’s a drop of 11.6% in under four weeks.
Of course, some FTSE 100 stocks have fallen much further than others. Alas, my family portfolio happens to own one of the worst performers. Nevertheless, might this be a unique opportunity to buy into a solid business at a low price?
Diageo is depressed
Diageo (LSE: DGE) is one of the world’s largest producers and distributors of alcoholic drinks. This long-established British business was created by a mega-merger in 1997, but its origins date back to 1627 with Haig whisky. Some of its other leading brands include Guinness stout (1759), Johnnie Walker whisky (1820), Tanqueray gin (1830), and Smirnoff vodka (1864).
However, the market for alcoholic drinks has weakened since the post-Covid party boom of 2021. Revenues, earnings, and margins are slipping globally, driven down by changing social habits. For young people, drinking now competes with social media, video gaming, and (legal or illicit) cannabis for their time and money. For older adults, the rising cost of living makes going out for drinks and meals way more expensive than five years ago.
Shares slump
Sometimes, even companies with histories going back four centuries get into trouble. At its all-time high, the Diageo share price closed at 4,036p at end-2021. Every year since then has heaped more pain on the group’s shareholders. This includes my family portfolio, which paid 2.806.6p a share for our stake in January 2024.
As I write, Diageo shares trade at 1,400.5p, valuing this FTSE 100 stalwart at £31.5bn. That’s around a third of what the company was worth at its peak. Even worse, the shares hit a multi-year low of 1,350p on Monday, 23 March. Remarkably, the share price today is where it was in January 2012.
My investment hero — mega-billionaire and philanthropist Warren Buffett — once remarked that his goal was to buy into good businesses at fair prices. With the Diageo share price at 14-year lows, could this be an exceptional time to buy into this group at a discount?
I think it is, but fair warning: Diageo has challenges to overcome. Sales growth is low or negative, profits are under pressure, and new CEO ‘Drastic’ Dave Lewis has more halved the dividend payout. Lewis aims to turn this tanker around by cutting Diageo’s debt pile, while investing strategically to boost future growth.
Buying shares means buying a company’s future, not its past. For Diageo, I’m hoping that the next five years will turn out better than the previous five. Otherwise, this stock may turn into another value trap for investors, instead of a recovery play!
