We recently published a list of Warren Buffett’s 10 New Stock Picks. In this article, we are going to take a look at where Diageo plc (NYSE:DEO) stands against other Warren Buffett’s new stock picks.
Warren Buffett is one of the few investors that do not require an introduction as his success, wealth and philanthropy are widely known and admired. Earlier this year, Buffett made it clear that his fortune, estimated at around $140 billion will go into a charitable trust that will be administered by his three children. Moreover, the trust will only be able to disburse funds upon unanimous agreement from all three children. In a recently-released letter to shareholders, Buffett explained:
“That restriction enables an immediate and final reply to grant-seekers: “It’s not something that would ever receive my brother’s consent.” And that answer will improve the lives of my children.”
However, in the meantime, Buffett still appears to be at the helm and running the operations at Berkshire Hathaway Inc (NYSE:BRK.A), even though he has handed over most of the day-to-day managing duties to his lieutenants. In the latest financial report, it was revealed that Berkshire has amassed a huge position in cash, cash equivalents and short-term investments in US Treasuries. The cash pile, which stands at $277 billion, is the largest that the holding company has ever had. Moreover, Berkshire has slowed down its stock buybacks and hasn’t bought any of its own shares in the third quarter.
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This has prompted many to speculate that Buffett sees the market as over-valued and is likely anticipating a downturn. In this way, gathering cash will allow Berkshire to purchase shares at cheaper prices. Another explanation might come from Buffett’s comments made at the annual meeting of Berkshire shareholders, where he said that he expected that capital gain taxes to go up, so realizing profits now might be way to save money later.
Nevertheless, Berkshire still maintains a portfolio of 40 stocks. Many of the companies that the fund owns are long-term holdings and you can take a look at some of them in our analysis of Warren Buffett’s 10 longest-held stocks.
Our Methodology
In-line with Buffett’s legacy, Berkshire holds a diversified portfolio and does not make a lot of changes during a quarter. Nevertheless, every quarterly 13F filing reveals two or three new positions acquired during the reporting period. To compile the list of Warren Buffett’s new stock picks, we have scanned through Berkshire’s filings for the last couple of years and have identified 10 stocks that Berkshire has acquired and still holds according to the latest filing.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of bottles of whisky and other alcoholic beverages from a winery.
Diageo plc (NYSE:DEO)
Shares held by Berkshire Hathaway: 227,750
Stake Acquired: Q1 2023
It’s no secret that Warren Buffett likes consumer staples, his longest-term holdings including The Coca-Cola Co (NYSE:KO) and Kraft Heinz Co (NASDAQ:KHC). In 2023, Buffett also added global alcoholic beverages manufacturer Diageo plc (NYSE:DEO). Berkshire acquired the shares as Diageo plc (NYSE:DEO) stock was below the $200+ highs reached in 2022 and so far the investment most likely has lost money as the stock has been trending down for quite some time as the company has been facing lower volumes due to high inflation and weaker consumer spending and the leadership expects tough times to continue in the near future.
Nevertheless, Diageo plc (NYSE:DEO) is one of the leading alcoholic beverages companies in the world with a solid portfolio of brands that includes well-known names such as Johnnie Walker and Guinness.
The company enjoys a robust financial position with more than $20 billion in revenues for the past couple of years. Diageo also has $2.60 billion in free cash flow as of the end of 2024 and has been consistently growing its dividend for more than three decades. It does have quite a lot of debt at $22.11 billion, but for cash cow companies such as Diageo plc (NYSE:DEO) this is rarely an issue.
Overall, DEO ranks 9th on our list of Warren Buffett’s new stock picks. While we acknowledge the potential of DEO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DEO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.