It’s been a pretty good start to the year for investors in UK shares and US stocks. As I write, the FTSE 100 index hovers around 6,876.76 points, up almost 420 points in 2021. That’s a return of 6.4% in three months. Furthermore, the US S&P 500 index hit all-time highs this week. On Tuesday, it closed at 4,073.94 points, gaining nearly 320 points in 2021, an uplift of 8.5%. But share prices could move even higher as and when the global economy bounces back. For me, the best stocks to buy now are those best-placed to benefit from a post-Covid-19 ‘world party’. Here’s one FTSE 100 champion I like today.
Diageo is one of my best stocks to buy now
When the global recovery begins after Covid-19 infections decline, I’m expecting worldwide partying. What do people do when they party hard? They drink, they smoke and, where marijuana is legal, some get high. Of these three vices, the most socially acceptable is drinking alcohol. When bars, pubs, nightclubs and restaurants reopen, look at the shelves. How many of these big brands will you see? J&B and Johnnie Walker whisky, Smirnoff vodka, Captain Morgan rum, Baileys Irish cream, Gordon’s and Tanqueray gin, and Guinness stout. These eight brands are all owned and made by Diageo (LSE: DGE), one of my best stocks to buy now.
Diageo is a beautiful British success story. It sells more than 200 brands of (mostly alcoholic) drinks in over 180 countries. Basically, if alcohol is legal in a state, then Diageo sells drinks there. Although Diageo as a corporate entity has only existed since 1997, its origins go way back. Haig whisky has been made by this Scottish family since 1627, while Guinness stout has been brewed in Dublin, Ireland since 1759. John Walker started blending whisky in Kilmarnock, Scotland in 1820. This storied history is one reason why I see Diageo as a brilliant business and one of the best stocks to buy now.
Diageo needs a party
There’s a second reason why I see Diageo as a strong stock to buy today. The group could experience a considerable sales boost when the leisure and entertainment industry returns to life. When licensed premises open for business, I imagine huge pent-up demand could be unleashed. When lockdowns are finally over, I expect we’ll party like it’s 1999. After all, consumers globally have increased their savings by trillions of pounds, dollars and euros, due to reduced expenses from working from home. With postponed major events such as the UEFA Euro 2020 football tournament in the pipeline, this summer might be a real sizzler.
Last autumn, the Diageo share price dived to a 52-week low of 2,426p on 1 September. As I write, it stands at 3,093.5p, valuing the group at £70.4bn, and up over a fifth (21%) in 12 months. Although the share price has risen by over £6 in seven months, there could be more gains to come. Today, the shares offer a dividend yield of 2.3% a year, which could rise over time.
Of course, all bets are off if the post-Covid-19 party doesn’t kick off. If this global pandemic lingers for longer, or more infectious and deadly variants emerge, this will hurt Diageo’s sales. Indeed, revenues could tumble again, as they did in Q2 2020. Even so, given its near-400-year pedigree and brand strength, I still see Diageo as one of the best stocks to buy now!
Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.