Are the final recovery game actions?

It never rains but is poured. That seems to have been the story for Brewer and Distiller Diageo (LSE: DGE) In recent years. Difficult markets in Latin America, a growing number of consumers who reject alcohol, supply challenges with Guinness in England: the list continues. It is not surprising that diageo actions have lost more than a quarter of their value in the last year.

However, taking a step back, there are some things to remember what more and more looks like a company in trouble.

This Ftse 100 The company is enormously profitable and has a market capitalization of £ 49 billion.

It has increased its dividend by action annually for decades. It has many of the main brands of alcoholic beverage in the world, Johnnie Walker to Smirnoff.

So, while diageo actions have had a low performance lately, could it be the ideal recovery game for a long -term investor like me?

This is future demand

Diageo can do better or worse at different times.

But in the long term, I think that the demand for premium alcohol is resistant, it has the correct assets to prosper. Those include strong brands, unique production facilities and an excellent global distribution network.

So I think that the key question when it comes to how good a recovery game can be what will happen with the global alcohol market in the coming decades.

After all, weak demand and the decrease in interest among younger consumers is not a specific problem for diameter. Which is on the US list. Crown brewer Constellation marks It has fallen by 27% in a year. Anheuser-Busch Inbev It has dropped 13%. In Europe, Remy Cintreau The shares have fallen 48% in the last 12 months.

Multiple risks face the beverage industry

In general, there are good reasons for this type of defeat.

Investors have real concerns about the short -term demand of premium typples and the long -term issue of whether alcohol sales will enter the type of decrease we have seen with cigarettes. They could.

The provisional results of diageo this month provided a cold comfort, with volumes and sales income in the first half of their financial year showing slight decreases year after year.

Since the global economy still seems uncertain and many consumer budgets are stretched, I do not hope to see any strong change soon, either in commercial performance or in diageo actions.

Here's why I feel safe

However, in the long term, I doubt that the spirits market shows a significant and sustained decrease. As more people enter the middle class as the global population grows, I hope that spiritual demand remains high.

I think beer can see more obvious volume decreases, although in recent years Guinness has successfully competing that trend. The first half was the consecutive eighth in which black things have provided a two -digit growth.

So, although I do not see any immediate reason for diageo actions to recover big in the short term, as a long -term investor, I feel quite well with their recovery prospects.

It may not be the final recovery game: some very small companies have more space so that their prices of battered actions shoot.

But I like the diageo size. Unlike many recovery plays, even while fighting, it is still greatly profitable. I plan to hold on to my diageo actions.