We came across a bullish thesis on Diageo plc (DEO) on Substack by Jimmy Investor. In this article, we will summarize the bulls’ thesis on DEO. Diageo plc (DEO)'s share was trading at $109.29 as of March 17^th. DEO’s trailing and forward P/E were 16.94 and 13.62 respectively according to Yahoo Finance.

Diageo (DEO) is a global leader in premium spirits and beverages, owning iconic brands like Johnnie Walker, Guinness, Smirnoff, and Don Julio. Its strong brand equity and premium pricing power allow it to pass rising costs to consumers without sacrificing demand, ensuring resilient profitability. Unlike many consumer staples companies struggling with raw material inflation, Diageo’s dominance in whiskey, tequila, and beer enables it to maintain strong margins. The company continues to strengthen its position through direct-to-consumer expansion via e-commerce and exclusive brand collaborations, further enhancing its profitability. Alcohol consumption remains stable even during economic downturns, making Diageo’s business highly defensive. Its global footprint across Europe, North America, and emerging markets provides diversification, reducing risks tied to any single region. Currently trading at 22x forward earnings—slightly below its 10-year median of 24x—the stock presents an attractive valuation given its superior 30% EBIT margin, well above consumer staples peers. With a free cash flow yield of approximately 4% and a manageable net debt/EBITDA ratio of 2.5x, Diageo is positioned for consistent dividend growth. Its strong pricing power, global reach, and premium positioning make it a compelling long-term investment with downside protection and steady compounding potential.

Diageo plc (DEO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held DEO at the end of the fourth quarter which was 26 in the previous quarter. While we acknowledge the risk and potential of DEO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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 was originally published at Insider Monkey.