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I picked up a few old-school stock market heroes earlier this year as I thought their shares looked undeniably valuable following the recent downturn.
I’ve been watching both of them FTSE 100 shares for many years and was happy to buy them at what I thought was a fair price. I thought they would meet soon but they never did. Now I am angry with them. And yes, I know that’s not a very mature answer.
FTSE’s former first love is a spiritual giant Diageo (LSE: DGE). I picked it up in November last year shortly after it issued a profit warning following declining sales in its Latin American and Caribbean markets.
I need a drink after buying Diageo shares
As the region’s economy struggled, drinkers began swapping premium Diageo brands for local firewater, and began selling. The consolidation of assets did not help.
Don’t worry, I thought, Diageo is a big maker of different drinks and Latin America is only a tenth of its total market. But selling elsewhere is never good. Especially in China. Recent reports that Beijing is including temporary anti-dumping tariffs on imported brandy are another concern.
I am also concerned about Gen Z’s attitude towards alcohol. Instead of hitting their best and falling like the young people of my time, they shrink for fear of making a fool of themselves on social media. It says a lot that it is Diageo’s biggest success story right now Guinness 0,0.
Diageo’s share price is down 26.58% for the year, which is a significant decline. I’m down 16.81% after snapping it up at a supposedly discounted price.
Trading at 17.54 times to get it looks cheap by previous standards. But maybe we shouldn’t measure Diageo against those anymore.
Should I sell? As a long-term buy-and-hold investor, that would be against my principles. Sod’s law says when I sell its shares they will rocket.
GSK’s share price needs to be picked up
I will give Diageo time to sort itself out. Stock markets have generally gone sideways recently, so now is not the time to panic and sell good companies. Which brings me to the pharmaceutical giant GSK (LSE: GSK).
In its former state of GlaxoSmithKleinwas the top dog among FTSE 100 income investors back in the day.
Chief executive Emma Walmsley has been fighting to fill the drug pipeline since she took over in 2017, but success remains elusive. I was hoping its shares would take off along with the US lawsuit over the blockbuster heartburn drug Zantac were resolved. Instead, they continued to slide.
GSK’s share price is down 3.14% over the past 12 months. Personally, I’m down 16.17%. I didn’t expect that from a stock that I thought was a good defensive game.
New investors may be tempted by the high yield of 4.22% but that is down to falling prices rather than growing dividends.
GSK now looks really cheap trading at 8.9 times earnings. One day we may look back and see this as a great opportunity. Let’s hope so. I’d be down on both Diageo and GSK if I could, but today I’m fully invested. So I’ll close my eyes, take a deep breath and wait. Patience is a virtue, I am told.
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