Diageo shares News | The Twelfth Magpie https://www.twelfthmagpie.com/tag/diageo-shares/ Share Tips, Investing and Stock Market News Wed, 01 Jul 2026 07:15:00 +0000 en-GB hourly 1 https://wordpress.org/?v=7.0 https://www.twelfthmagpie.com/wp-content/uploads/2026/05/cropped-Magpie_Icon_Black_RGB-1-32x32.png Diageo shares News | The Twelfth Magpie https://www.twelfthmagpie.com/tag/diageo-shares/ 32 32 2 top FTSE 100 shares to buy before a new bull market https://www.twelfthmagpie.com/2022/07/05/2-top-ftse-100-shares-to-buy-before-a-new-bull-market/ Tue, 05 Jul 2022 13:27:00 +0000 https://www.twelfthmagpie.com/?p=1149080 On my search for FTSE 100 shares to buy before the recovery, I have found two growth options that could boost my returns in the next decade.

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]]> With sky-high inflation and fears of a recession in the UK, stock markets have taken a big hit. But I think global indexes might already be on their way back up. With investor fear high right now, some top FTSE 100 shares are available at bargain prices. And one of my 2022 investing goals is to capitalise on bear markets and invest at the right time. 

I have zeroed in on two shares for my portfolio. These are businesses that I think show growth potential and can generate cash even in tough economic conditions.

Grocer with sky-high dividends

At current levels, I think the Sainsbury (LSE:SBRY) share price is one of the best bargain options in the FTSE 100 right now. AT 209p, it is trading at a price-to-earnings ratio of 7.2 times and a lofty 6.2% yield.

Yes, the company has been in the news this week after last quarter’s sales dipped 4%. But this was in line with board expectations and the profit estimate for the year remains unchanged at between £630m and £690m. While this is lower than the 2021-22 profits of £730m, the company has a few plans up its sleeve. 

Given the rising raw material costs, the board will inject £500m over the next 24 months to keep product cost inflation at the minimum. I think this move will help the grocer gain footing on Tesco and grow its current 15% market share as inflation runs rampant.

Despite small margins, if profit estimates are met, the company expects to generate retail free cash flow of at least £500m in 2022-23, similar to last year’s £503m. I think the board will keep the payouts flat next year given tough economic conditions. But a healthy 5%+ yield looks likely, which I see as a positive.

However, the impact of inflation will hit this sector hard. Large grocers like Sainsbury will lose out to discount retailers, even if current prices are maintained. And this will inevitably eat away at Sainsbury’s revenue. 

But overall, this FTSE 100 firm looks well-set to navigate choppy waters. I am bullish on Sainsbury shares and will consider them for my portfolio in 2022  if signs of a market recovery become stronger. 

Alcohol heavyweight

Diageo (LSE:DGE) is a global alcohol aggregator that owns extremely popular brands like Smirnoff and Johnnie Walker. The FTSE 100 company has adopted an emerging market strategy, focusing on growing regions like India and China.

Down 14.8%, I think the Diageo share price is going through a rare lull given its steady rise over the last five years. And looking at the share price action over the last two decades, the company has been on an incredible upward trajectory. 

And I think this growth could continue given its fast expansion policy. Diageo recently purchased Vivanda, owner of a flavour matching technology. This will allow users to build a flavour profile and choose spirits based on suggestions. I think the company is adopting digital sales and shows a lot of growth potential.

Tough regulations and local competition will grow with expansion. And the company will have to deal with the rising tide of health-conscious youth who are choosing to go alcohol-free in record numbers. 

However, I think the company is well-placed to navigate this given its size, range, and future plans. This FTSE 100 share is not a bargain on paper at 3,525p, but I think the company offers a lot of value and growth. This is why I will wait for a drop in share price before investing.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo and Sainsbury (J). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

]]> 3 cheap FTSE 100 stocks I’d buy with a spare £1,000 https://www.twelfthmagpie.com/2022/03/29/3-cheap-ftse-100-stocks-id-buy-with-a-spare-1000/ Tue, 29 Mar 2022 10:14:00 +0000 https://www.twelfthmagpie.com/?p=273325 With the ISA deadline on the horizon, Charlie Carman picks three FTSE 100 stocks from the index he'd buy and hold for long-term returns.

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]]> I’m currently looking for undervalued FTSE 100 stocks. What’s more, the 5 April ISA deadline is fast approaching. I’d put a spare £1,000 to work today, buying and holding cheap UK equities in my Stocks and Shares ISA. Here are three FTSE 100 stocks in different sectors that I believe could perform well in the long term.

An airline stock ready to return to the skies

International Consolidated Airlines Group (LSE:IAG) experienced considerable turbulence during the pandemic. The IAG share price took a journey from 668p in January 2020 to penny stock levels, before eventually arriving at 140p today.

The outlook for IAG shares appears rosy to me, with the company likely to benefit from continued relaxations in travel restrictions. According to IATA, 38 of the world’s top 50 travel markets are now open to vaccinated travellers without quarantine — up from 28 just a month ago.

Indeed, this summer, the airline aims to fill 85%-90% of its 2019 capacity. CEO Luis Gallego foresees “significant profits” for 2022. This would mark a positive change in IAG’s fortunes. Last year, the company only managed to cut its pre-tax losses (from £7.8bn to £3.5bn).

At present, I view IAG as one of the cheapest FTSE 100 stocks. Granted, the emergence of a concerning new Covid-19 variant or escalating conflict in Ukraine could derail this hypothesis. Nonetheless, supported by improving financials and a recovering travel market, IAG stock looks like a good long-term buy for me.

A FTSE 100 dividend stock

Asset manager and insurer M&G (LSE:MNG) has one of the highest dividend yields of any FTSE 100 stock at 8.25%. Since it demerged from Prudential in 2019, M&G has delivered strong pre-tax operating profits, namely £788m in 2020 and £721m in 2021.

Other recent achievements include generating capital of £2.8bn in two years and bringing the total value of assets under management to £370bn.

If M&G maintains this performance, I see potential for capital growth for shareholders, in addition to passive income. In my view, this combination makes it a good FTSE 100 stock to beat inflation — currently running at 6.2%.

The firm is not focused on growing its insurance division, which acts as a cash flow bedrock for the business. This could undermine the company’s defensive credentials over time, but I still see value in the M&G share price and bumper dividends.

A Footsie share that consistently beats the index

Drinks giant Diageo (LSE:DGE) has been one of the best FTSE 100 stocks to own over the past five years. Beyond its index-beating returns, Diageo offers investors passive income from its current 2% dividend yield as a bonus.

Diageo delivered an increase in net sales from £11.75bn to £12.73bn for 2021. The company also boosted operating profit to £3.73bn – a 74.6% annual improvement.

Underpinned by intellectual property in an enviable list of brands from Guinness to Smirnoff and a free cash flow in excess of £3bn, the Diageo share price seems to go from strength to strength.

As consumers become more health conscious and possibly reduce their alcohol consumption, there are potential headwinds for Diageo stock. I would still buy it at present, however. My reading of the company’s financials is that demand looks robust.

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Charlie Carman does not own shares in any of the companies mentioned. The Motley Fool UK has recommended Diageo and Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

]]> Should I add Diageo stock to my portfolio? https://www.twelfthmagpie.com/2021/10/06/should-i-add-diageo-stock-to-my-portfolio/ Wed, 06 Oct 2021 11:01:50 +0000 https://www.twelfthmagpie.com/?p=247875 Having risen over 20% year-to-date is Diageo stock a buying opportunity? Dylan Hood takes a closer look if he should add this stock to his portfolio.

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Multinational drinks powerhouse Diageo (LSE: DGE) has had a strong run over the past 12 months, rising 32.5%. This growth was in the wake of the March 2020 stock market crash and placed Diageo as a standout FTSE 100 stock for the year.

Currently, Diageo shares are trading at 3,538p, dipping slightly from their August highs of over 3,600p. So, is now a good time to add Diageo stock to my portfolio? Let’s take a closer look.

Promising results

The 2021 Annual Report released last month contained some very encouraging metrics. Operating profit was up 75% to £3.7bn and net sales rose 8% to £12.7bn. Organic profit was also up 17.7%, outperforming the 14% target set at the start of the year.

2020 was a tough year for most businesses, so these numbers are to be expected year-on-year. However, in the last six months of 2020, organic sales rose 1%. This highlights to me that the firm was able to deliver positive results in the face of huge macroeconomic uncertainty, which is great news for Diageo stock, I feel.

In addition to this, it made a number of interesting acquisitions over the past year. Notable acquisitions included Loyal 9 and Aviation Gin. Capitalising on up-and-coming brands like this is essential if it wants to remain a frontrunner in the industry.

Another encouraging point was that more broadly, alcohol e-commerce sales were up 45%. Diageo has been able to capitalise on this with online sales rising 70% in the past year. This expansion has been in key markets in the UK, Germany, and China, all massive alcohol markets. A growing business like this is good news for Diageo stock.

Diageo stock value

Diageo stock currently trades on a price-to-sales (P/S) ratio of 6.48. Comparing this to competitors Heineken and Carlsberg that trade on 2.95 and 0.39 P/S ratios respectively, it begs the question of whether the current Diageo share price is too high? I thought it could be when I last covered the stock, however, it has since risen over 200p. Although the price has risen, the continuously encouraging results lead me to believe the stock could push higher. Also, perhaps investors don’t mind the fact that Diageo stock is overvalued on paper. I’m starting to feel that way myself due to its strong performance. If this is the case it could keep pushing higher.

Long-term outlook

Here at The Motley Fool UK, we like to think long term. Looking at Diageo stock, I believe it could be a good long-term investment for my portfolio.

Diageo saw a strong rebound in 2021 and the back end of 2020. The firm’s open attitude towards acquisition is also attractive to me. The existing portfolio of products Diageo already has also gives me long-term confidence. People are going to be drinking household beverage names such as Smirnoff and Baileys for years to come.

Finally, the lofty valuation seems to not be worrying investors. All things considered, I like the look of Diageo stock and would consider adding it to my portfolio today.

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Dylan Hood has no position in any shares mentioned above. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

]]> The Diageo share price hits an all-time high! Is there further to rise? https://www.twelfthmagpie.com/2021/07/21/the-diageo-share-price-hits-an-all-time-high-is-there-further-to-rise/ Wed, 21 Jul 2021 07:28:19 +0000 https://www.twelfthmagpie.com/?p=231556 The Diageo share price has responded resiliently since the pandemic, currently priced at an all-time high. But what's next for this drinks giant?

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]]> After crashing at the start of the pandemic, the Diageo (LSE: DGE) share price has responded resiliently. In fact, it is currently priced at close to 3,500p, which is an all-time high. This has been driven by a recent strong trading update and a forecast of organic operating profit growth to be at least 14% in 2021. Nonetheless, challenges do still remain, and the Diageo share price may now be overpriced. As such, do I think that there is further to rise, or has it reached its peak?

Trading updates

There is no doubt that Diageo was affected by the pandemic. In fact, mainly due to the closures of bars and restaurants, operating profits in 2020 were £2.1bn, nearly 50% lower than 2019. Despite this, there were a number of positive signs. Firstly, business was able to grow in North America, with operating profits up 4%. There is hope that the company will be able to build on this success in upcoming years. Secondly, despite the lower profits, the drinks giant decided to increase its dividend. This is a major sign of confidence, and the Diageo share price rose as a result.

The most recent trading update has provided more positivity, especially after predicting at least 14% organic growth in 2021. Even so, I was personally more excited by the announcement that it was restarting its return of capital programme. This means that due to its strong performance, Diageo will be returning up to £1bn in share buybacks by the end of the 2022 financial year. This demonstrates that liquidity is strong, and confidence is high.

Risks

Despite the company’s resilient performance throughout the pandemic, challenges are still numerous. For instance, coronavirus cases are still very large around the world, and due to the company’s global presence, revenues may continue to be hit in many areas.

Furthermore, Diageo has a debt pile of £15.3bn, giving it a debt-to-equity ratio of around 200%. This is extremely high, and if operating cash flows are negatively affected, it could lead to major ramifications. Although there is no indication that this will happen, it is still a risk to highlight with the Diageo share price.  

Finally, I am slightly concerned with the company’s current valuation. For example, it has a forward price-to-earnings ratio of around 25, which is by no means cheap. Evaluating its price-to-book (P/B) ratio also demonstrates the company’s high valuation. Indeed, Diageo has a P/B ratio of 12. Its competitor, Pernod Ricard, on the other hand, has a P/B ratio of just 3.5.

My verdict on the Diageo share price

Due to its ever-growing portfolio of drinks, global presence and strong management, Diageo is one of my favourite FTSE 100 stocks. As such, it makes up a significant part of my portfolio and I feel that it has more scope to rise long term. Despite this, the Diageo share price still looks expensive, and I expect a correction over the next few months. As such, I won’t be buying any more shares right now and may reduce my holding instead. I’m looking elsewhere for bargains.

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Stuart Blair owns shares in Diageo. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

]]> What’s next for the Diageo share price? https://www.twelfthmagpie.com/2021/07/12/whats-next-for-the-diageo-share-price/ Mon, 12 Jul 2021 07:22:13 +0000 https://www.twelfthmagpie.com/?p=230310 Up almost 20% year-to-date, the Diageo share price has been a standout FTSE 100 performer. Dylan Hood takes a look at what’s next for this stock.

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]]> When I last covered Diageo (LSE: DGE), its share price was hovering around 3,000p. Since then, prices have been rising steadily, now sitting at over 3,400p. Not only is this vastly higher than its March 2020 lows, and exactly a year ago, but it’s also higher than its pre-pandemic value. Considering this encouraging performance, I’ve been taking a look at where I think the Diageo share price will go next.

Pandemic problems

The multinational alcoholic beverage producer had a turbulent time during 2020. Persistent global lockdowns forced widespread closures across the hospitality business. Net sales and net cash fell 8.4% and 29%, respectively, compared to 2019 figures. Poor financial performance was reflected in the share price, which fell to just 2,400p in March 2020.

That said, Diageo finished the last sixth months of 2020 with organic sales up 1%. This can be attributed to the increases in household alcohol consumption forced by hospitality closures. For example, in the UK, spirit sales were up a whopping 15% during lockdown.

Current Diageo share price

The Diageo share price is up 19.2% year-to-date. In addition to this, it has gained over 40% since its March 2020 lows. Is the stock still a good buy?

Looking at the price-to-book (P/B) value of Diageo and comparing it to competitors Heineken and Carlsberg may help me answer this question. Diageo is currently trading at an 11.5x P/B ratio, which means it is trading at 11.5 times its book value. Heineken and Carlsberg are trading at 4.5x and 4.3x P/B ratios respectively. This shows me that the Diageo share price is overvalued compared to its competitors, which discourages me from adding this stock to my portfolio at current prices.

Future trajectory

Yet the recent performance of Diageo has been very encouraging. However, will this trajectory continue? Past performance should not be indicative of future returns, however, there are several reasons I am confident the Diageo share price could keep rising.

Firstly, Diageo has said it is expecting an organic operating profit growth increase of 14% in 2021. The firm stated this would come primarily from the reopening of its markets across the world. If such results come to fruition, I would expect a rise in the Diageo share price.

I also like the longevity that Diageo’s product portfolio provides. Household beverage names such as Smirnoff and Baileys will still be consumed decades from now. In addition to this, Diageo is always expanding its product arsenal, with a notable purchase of Aviation Gin in 2020. Constantly expanding its product portfolio is a necessity for Diageo if it wants to remain a frontrunner in the industry.

Although the pandemic does still provide some uncertainty moving forward, I think that the Diageo share price can continue an upward trajectory. The stock may be ‘overvalued’ compared to competitors; however, we have seen stocks like Tesla trade at almost 40x book value and still continue to grow. Therefore, I like the look of Diageo as a solid growth addition to my portfolio.

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Dylan Hood owns shares in Tesla. The Motley Fool UK owns shares of and has recommended Tesla. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

]]> Diageo shares rise but could this reopening play make further gains? https://www.twelfthmagpie.com/2021/05/19/diageo-shares-rise-but-could-this-reopening-play-make-further-gains/ Wed, 19 May 2021 14:06:57 +0000 https://www.twelfthmagpie.com/?p=221679 Diageo shares have performed well in the last year. Could further reopenings see this stock continue its run-up or has it run its course?

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]]> After the performance of Diageo (LSE:DGE) shares this year, I decided to take a closer look at the company. Most importantly, to ask whether there’s room for Diageo shares to continue their rise.

With Diageo shares up by 17.8% year-to-date, investor confidence in the company has quickly recovered from the initial stages of the pandemic. In fact, at approximately 3,300p per share, the company is trading above where it was prior to the pandemic, at around 3,200p.

Resilience during pandemic

In its first half of 2021 results, Diageo managed to increase net sales of its alcohol beverage products by 0.9%. The company noted that the increase in sales was a result of people buying the products for consumption at home. The company’s sales grew by 12% in North America and by 10% in the UK.

This meant that net profit was only down by 15.3% year-on-year, and was still healthy at £1.58bn.

Shortly after the first half of 2021 results, Diageo announced it would return capital to shareholders. The company announced that it had decided to increase its dividend by 2%. All of this resulted in Diageo shares rising by 9.95% in the last three months.

Looking to the future

As bars and restaurants open up across Europe, could demand for the company’s products positively impact share price further? Looking ahead to full-year 2021 results, Diageo announced that it expects organic operating profit growth to increase by at least 14%. The company stated the increase in profit will arrive from the economic re-opening in Europe and a recovery in its Africa, Asia Pacific, and Latin American markets.

This outlook was a driver behind the decision to repurchase shares. By the end of the fiscal year 2022, the company plans to repurchase £1bn shares and immediately cancel them. Another promising sign for investors was Diageo stating that e-commerce rose to 5% of group sales, up from 2% prior to the pandemic.

The risks

The principal risk to shareholders of Diageo is similar to that most businesses currently face – the course the pandemic will take. Further widespread lockdowns would again reduce profit, which could weigh on the share price.

Broader than this is the question of how much further growth can Diageo squeeze from its market. The overall beverage industry has experienced consolidation through acquisitions. At present, half of the world’s top-selling spirit brands are owned by Pernod Ricard, Baijiu, and Diageo itself. This makes further growth through acquisition tricky.

To answer my original question, I can’t see Diageo shares rising significantly as pandemic restrictions ease further. The company’s share price recovered from the pandemic hit quickly. This was followed by Diageo broadcasting its positive outlook through the share buyback. I believe this has already been accounted for in its current share price, which is fairly valued, in my opinion.

The fact that Diageo shares did so well during the pandemic is a sign of an overall strong business. Rather than a reopening play, I would look to Diageo when adding a steady, low-growth acquisition to my portfolio.

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Ben Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

]]> Will the Diageo share price keep climbing? https://www.twelfthmagpie.com/2021/03/25/will-the-diageo-share-price-keep-climbing/ Thu, 25 Mar 2021 15:49:00 +0000 https://www.twelfthmagpie.com/?p=215652 After some recent moves in the Diageo share price, Dylan Hood takes a look at why this stock could be a great long-term investment.

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]]> The Diageo (LSE: DGE) share price has been up and down since the pandemic started last year. Peaking at 3,500p at the end of 2019, prices dropped as low as 2,400p in March 2020. Share prices are up 500p year-to-date, hovering around the 3,000p mark. Although prices have been shaky throughout the last 12 months, I still believe this stock is poised to climb higher in the future.

The background

Diageo is the owner of over 200 brands of alcoholic beverages. Some of the most recognisable names include Guinness, Cîroc, Smirnoff and Baileys. But persistent lockdowns have led to the mass closure of the hospitality industry, affecting the FTSE 100 firm. However, Diageo finished the last six months of 2020 with organic sales up 1%. This has largely been due to the increases in household alcohol consumption, with spirit sales up 15% in the UK alone.

What’s more, the recent announcement of the UK-US whisky tariff suspension has helped drive the Diageo share price up over 5% since the beginning of March. The four-month suspension is in place until a long-term settlement is reached.

Although this is good news, reported net sales were still down 4.5% to £6.9bn for the second half of 2020. This was reflected in operating profits, which fell 8.3% to £2.2bn. However, the company did display good cash generation, with free cash flow up from £800m to £1.8bn. This highlights what Chief Executive Ivan Menezes believes to have been a “strong performance in a challenging operating environment”.

Current Diageo share price

Competitors Heineken and Carlsberg also reported decreases in organic revenues of 11.9% and 8.4% respectively. However, Diageo is currently still sitting at a much higher price-to-sales ratio of 6.15 compared to Heineken’s 2.56 and Carlsberg’s 2.44. This begs the question, is the current Diageo share price overvalued?

While 2020 definitely hurt the Diageo share price, I still believe that it’s a good stock to buy now. People should still be consuming household beverage brands like Guinness and Smirnoff decades from now. This gives the stock longevity, an attractive quality for investment. The constant acquisition of up-and-coming brands is also attractive to me. For example, George Clooney’s Casamigos tequila operation was bought for £700m in 2017 and saw a 139% increase in sales during the last sixth months of 2020.  

The 2.3% dividend yield is also attractive, largely reflecting the slow but steady growth rate of the company. In addition to this, the global easing of pandemic restrictions is only going to boost business. The hospitality business is likely to boom in the next few years and the Diageo share price will benefit from this. However, the alcoholic beverage industry still remains highly regulated. For example, consumption is prohibited in some Indian states, a key market for Diageo. This could also affect long-term growth.

But overall, despite the recent struggle, I think the Diageo share price can keep climbing as we move closer to a post-pandemic world.

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Dylan Hood has no position in any shares mentioned. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

]]> Investing like Warren Buffett: the UK shares I’d buy and one I’d avoid https://www.twelfthmagpie.com/2021/01/05/investing-like-warren-buffett-the-uk-shares-id-buy-and-one-id-avoid/ Tue, 05 Jan 2021 08:52:59 +0000 https://www.twelfthmagpie.com/?p=194168 Warren Buffett has built his success by investing in high-quality value stocks. Stuart Blair writes about some UK shares that could fit this criteria.

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]]> Warren Buffett is recognised as one of the best value investors in the world. This means that he looks for undervalued companies and buys them. Sounds very simple. Even so, when a stock is cheap, it doesn’t necessarily mean good value. A number of other factors must therefore be taken into account and Buffett has highlighted these factors on multiple occasions. The following UK shares are good examples of stocks I think Warren Buffett would like, and one he’d stay away from.

Quality matters

Although Buffett looks for cheap shares, he also acknowledges the importance of quality. This is shown by his quote: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

The first UK share that I think fits well with this quote is Diageo (LSE: DGE). The drinks company has used debt extremely effectively to make a number of shrewd acquisitions. Most recently this has included capitalising on low interest rates and issuing more debt to acquire Aviation Gin. This adds to the company’s enviable selection of different brands, further cementing it as a market leader. Although issuing too much debt can lead to severe problems, these acquisitions have been accompanied by rising profits. I therefore believe that the slight dip in both profits and the share price this year due to the pandemic offers a good time to “buy a wonderful company at a fair price”.

Packaging company Mondi (LSE: MNDI) is another quality UK share. With the continued rise of e-commerce, packaging is big business. This should allow an innovative company like Mondi to continue growing profits, which have already risen to over £1bn. A price-to-earnings ratio of 12 represents a fair price to pay for such a quality company, I feel.

Buying the dip

Buffett also recognises that “the best thing that happens to us is when a great company gets into temporary trouble”. Although I wouldn’t say that Sage (LSE: SGE) is in trouble, its recent share price dip due to a fairly poor 2020 financial performance is still a worry. But this is what makes it a Buffett-type stock. Changes are already coming for the UK tech stock, and I think this “temporary trouble” makes it a great time to buy.

The UK share I’d stay away from

Cineworld (LSE: CINE) is certainly cheap. This is shown by a market cap of under £1bn, despite it being the second largest cinema chain in the world. Even so, cheap valuations don’t mean value and I think Cineworld is a good example of this. In fact, while I praised Diageo earlier for its use of debt, Cineworld’s debt-fuelled acquisitions have led to £6.1bn in borrowings, compared to shareholders’ equity of just £1.2bn. This represents a severe problem for a company that’s currently unprofitable.

As a result, I don’t think Warren Buffett would buy this troubled UK share. His sale of airlines in 2020 demonstrates his views on many troubled industries and Cineworld is no different. This is one I’m staying away from!

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Stuart Blair owns shares in Diageo, Mondi and Sage Group. The Motley Fool UK has recommended Diageo and Sage Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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