Lindsell Train, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be seen here. In its letter, the fund dug a bit deeper and put some numbers to the phrase by exploring global changes in alcohol consumption and consumer habits. The fund also talked about some quantified optimism about why its efforts to increase the percentage of premium (and extending to out and out luxury) international alcohol brands in its portfolios are a positive move to address these changes, take advantage of opportunities around the world, boost margins over time and lock in the considerable pricing power of its portfolio companies’ collections of unique and compelling beverage brands. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Lindsell Train, in its Q4 2021 investor letter, mentioned Diageo plc (NYSE:DEO) and discussed its stance on the firm. Founded in 1997, Diageo plc (NYSE:DEO) is a London, United Kingdom-based beverage company with a $118.6 billion market capitalization, and is currently spearheaded by its CEO, Ivan Menezes. Diageo plc (NYSE:DEO) delivered a -6.95% return since the beginning of the year, while its 12-month returns are up by 23.36%. The stock closed at $204.85 per share on March 28, 2022.
Here is what Lindsell Train has to say about Diageo plc (NYSE:DEO) in its Q4 2021 investor letter:
“A very important aspect of the rationale for investing in this smaller and more rarefied category is the fact that alcohol brands with a premium or luxury positioning tend to be highly differentiated, with a greater ability to increase prices over time than a “value” or mass market brand – even in downturns or periods of turbulence. Over time, these inflation-busting protective qualities usually result in considerable value creation: in January this year, against a backdrop of a sharp increase in input cost prices, Diageo reported increased operating profit margins – crucially, driven by price increases rather than cost savings – and indicated an expectation of operating profit growth of between 6 and 9% to 2025. Such an outlook would not be possible without a portfolio of beverages enjoying substantial pricing power.” (Click here to see the full text)
Our calculations show that Diageo plc (NYSE:DEO) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Diageo plc (NYSE:DEO) was in 19 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 18 funds in the previous quarter. Diageo plc (NYSE:DEO) delivered a -6.71% return in the past 3 months.
In March 2022, we published an article that includes Diageo plc (NYSE:DEO) in the 10 Recession-Proof Stocks to Buy and Hold. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.