{"id":35825,"date":"2013-01-30T16:09:37","date_gmt":"2013-01-30T21:09:37","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=35825"},"modified":"2013-01-30T16:09:38","modified_gmt":"2013-01-30T21:09:38","slug":"follow-up-to-diageo-the-ultimate-12-to-18-year-investment","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/01\/30\/follow-up-to-diageo-the-ultimate-12-to-18-year-investment\/","title":{"rendered":"Follow-Up to \u201cDiageo: The Ultimate 12- to 18-Year Investment\u201d"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

Back in June, I mused that Diageo (NYSE:$<\/span>DEO<\/a>)<\/b>, the maker of Johnny Walker Scotch whisky and other brands, was \u201cThe Ultimate 12- to 18-Year Investment<\/a>.\u201d<\/strong> It was, of course, a reference to the length of time that Scotch needs to be aged in order to be marketable (or drinkable).\u00a0 Scotch can be officially be called \u201cScotch\u201d after just three years of aging, but good luck convincing a discerning gentleman to buy it.<\/p>\n

This is what makes Scotch whisky such a fantastic business to be in.\u00a0 Unlike, say, vodka, which can be produced from anything, has little in the way of start-up costs, and has no aging requirements, Scotch has incredible barriers to entry.\u00a0\u00a0 Vodka brands come and go, but the scotch brands you see today are the same ones that were in your grandfather\u2019s liquor cabinet.<\/p>\n

On a side note, readers have asked me why I write \u201cwhisky\u201d at some times and \u201cwhiskey\u201d at others.\u00a0 \u201cWhiskey\u201d can be bourbon, Irish, or rye whiskies. \u201cWhisky\u201d refers to Scotch or Canadian whisky only.\u00a0 I do not recommend \u00a0getting these spellings confused in the presence of a Scotsman.<\/p>\n

Returning to the business at hand, the Financial Times reported that there is something of a Scotch distillery boom underway in Scotland (see \u201cDemand puts whisky industry in high spirits<\/a>.\u201d)<\/p>\n

Over the next four years, \u00a32 billion in new distillery investment is planned<\/strong><\/em>.\u00a0 To give an idea of how big this is, the total value of Scotland\u2019s whisky exports in 2012 was \u00a34.3 billion.<\/p>\n

Not surprisingly, the big names like Diageo are far and away the largest investors, but new craft distillers are popping up as well.\u00a0 These newcomers will have a hard time for the reasons I discussed in the prior article, but the fact that they exist at all is testament to the strength of the whisky boom.<\/p>\n

As I\u2019ve written before, the boom in Scotch and other luxury spirits is really an emerging markets boom and, particularly, a China boom.\u00a0 As China\u2019s new upper-middle class and nouveau riche climb the social ladder, they are developing a taste for premium Western brands.\u00a0 Much of the new whisky being distilled in Scotland will be shipped across the sea to China.<\/p>\n

I\u2019ve grown somewhat cautious towards booze stocks of late (see \u201cA Hangover in Booze Stocks?<\/a>\u201d though I continue to hold Diageo on the Sizemore Investment Letter\u2019s <\/i>Drip and Forget portfolio.\u00a0 I continue to reinvest the dividends on autopilot, but at current prices I am reluctant to make major new purchases.<\/p>\n

SUBSCRIBE <\/a><\/strong>to Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

The post Follow-Up to “Diageo: The Ultimate 12- to 18-Year Investment”<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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