Spurred by lockdown boredom and spare cash, many people have, in the quiet isolation of their homes, taken up a new hobby: investing.
But now that we can socialise in back gardens, dine alfresco and drink in pub beer gardens (if you can secure a table booking), how do you pursue your latest pastime without putting off friends and family?
An easy way to talk about stocks is finding out whether you can invest in the drink you’re holding in your hand or the watering hole that you’re visiting. The chances are pretty good, as some of the UK’s best known and most successful investors have long put money into drinks and drinking places.
Terry Smith, manager of Fundsmith Equity, and Nick Train, manager of Finsbury Growth & Income investment trust, both hold Diageo, owner of instantly-recognisable global brands such as Smirnoff, Guinness and Baileys.
It’s widely regarded as a consumer staple with long-term growth prospects — and plenty of shelf space in pubs. While Diageo accounts for only a small proportion of Smith’s portfolio, it’s Train’s biggest position, at 10.5 per cent.
The UK stock market has risen strongly in the run-up to the expected end of lockdown, so the question now is not just whether investors hold such companies but whether they should buy more.
Last year, Diageo’s shares didn’t fully live up to their defensive qualities in times of economic stress — when solid consumer stocks generally fare better than high-growth equities.
Nor do they now look like an obvious buy now, with the share price up 14 per cent since February 26. But the company is cash rich and eyeing investment opportunities in North America and China. It’s one to put on the watchlist if you’re prepared to hold for the long term.
Unlike in the US, there are no exchange traded funds (ETFs) available to UK investors, which focus solely on alcohol stocks However, the Xtrackers Stoxx Europe 600 Food & Beverage Swap UCITS ETF (have fun saying that after a few pints) has some heavy weighting (16 per cent) to alcohol and brewers, alongside other consumer staples. Pernod Ricard, Carlsberg feature in its top 10 holdings alongside Diageo and Heineken.
Is there perhaps a local wine or beer to prompt an investment chat by the bar? The opening up of the Aquis Stock Exchange (AQSE) via investment platforms has brought together some smaller names for consideration.
Chapel Down Group, the Kent sparkling wine producer, is listed on AQSE. Your friends and relations may have heard of the benefits to English wine of global warming. And this small company looks attractive, after its April sale of the Curious Drinks beer brand to focus on its fast-growing wine and spirits business. Not to mention the discounts of 33 per cent off wine and one free tasting tour for two per annum if you own at least 2,000 shares. That would be an outlay of £1,280, based on the share price of 64p as at April 23.
Beer drinkers might prefer to discuss Shepherd Neame, Britain’s oldest brewer, based in Kent since 1698, which owns 321 pubs and hotels and is also listed on AQSE. Holders of 100 to 2,999 shares (at 1,025p per share on 23 April) qualify for its Gold Shareholder Privilege Card, offering a 25 per cent discount on accommodation and 20 per cent on food.
Other brewers on AQSE include Adnams, based in Southwold, Suffolk, which also offers shareholders perks — 15 per cent off on anything from online drink sales to accommodation at one of the company’s hotels.
Remember there is no such thing as a free lunch (or drink, or pub stay) — you may have to hold a large number of shares to pick up a relatively small benefit. But if you’re an enthusiastic fan of the brand, then the discounts might add some fizz to the dry pursuit of capital gains.
Many people acquired a taste for unusual cocktails during lockdown, so you might consider premium mixer drinks manufacturer Fevertree Drinks, which Terry Smith and Nick Train both hold (Smith in his Smithson Investment Trust). Train initiated a position in February, describing it as “a leap in the dark”.
In March, Fevertree flagged its expectation for sales growth of up to 16 per cent over 2021, below City forecasts of around 18 per cent. However, the company has been resilient during the pandemic and long-term investors may feel optimistic. At 2447p, the share price remains well short of its September 2018 high of 3863p.
Will we all always drink alcohol? A range of studies from countries where drinking is a big part of the culture has shown a sharp decline in alcohol consumption among young people. But the big brands are rising to this challenge — Heineken, a top 10 holding for Nick Train, is looking to expand its low and no-alcohol beers. And there are plenty of powerful soft drinks brands to consider.
The giant is Coca-Cola, which last week posted better than expected quarterly earnings. Analysts’ consensus ratings are a buy — they think Coke’s sales will grow 1.5 times faster than Pepsi’s this year, with billionaire investor Warren Buffett leaving his position in Coca-Cola untouched in his February portfolio rejig.
Meanwhile, the almost overwhelming desire to go to the pub as we emerge from lockdown is a strange, surely short-term development. And the most difficult question is: will people really go to the pub more, less or the same as they did before lockdown once the novelty of going out has settled?
I think it’s the latter — it’s so deeply ingrained in our culture. But in the words of Terry Smith in his January letter: “What are the similarities between a forecaster and a one-eyed javelin thrower? Answer: Neither is likely to be very accurate but they are typically good at keeping the attention of the audience.”
Be aware that if you talk about specific investments, your friends might buy them. So make sure that everything you say is taken with a pinch of salt. Or better, a twist of lemon.
Moira O’Neill is head of personal finance at Interactive Investor