Is liquor the next luxury?
Consumer Staples
David Scott argues that luxury liquor companies are facing the same structural challenges confronting luxury apparel. While pandemic-era demand and post-Covid inflation masked underlying weaknesses, those issues are re-emerging. Key headwinds include shifting demographics and declining alcohol consumption among younger generations, as well as industry overpopulation and fragmentation. Liquor companies are experiencing falling asset turns but margins have not risen to compensate and the operating leverage effects will be "very vicious" as a result. David also sees the rising use of weight-loss drugs like Ozempic as a further negative catalyst. Companies discussed include Diageo, Pernod Ricard, Brown-Forman, Kweichow Moutai and Wuliangye Yibin.
Edition: 213
- 13 June, 2025
China: Dividends and duds
Now is not the time to be buying developers and other property plays, according to David Scott. 1) Chinese property developers have never generated any meaningful FCF. 2) David heard the same story in Japan / Thailand following their property busts. The boom never returned and never will. 3) The more government involvement in an industry, the worse the returns are for the minority shareholders. 4) In a country of enormous numbers the amounts being talked about are too small. In this week’s edition of David's ‘A Strategist’s Diary’, he also outlines the key characteristics of a GCGB (Great China Growth Business) focusing on 3 stocks: Midea, Kweichow Moutai and Sungrow Power Supply.
Edition: 187
- 31 May, 2024
China Consumer Staples: Conviction overweight
Consumer Staples
Steven Holden reports how active MSCI China funds are positioned for the outperformance of the Consumer Staples sector - overweights are near record levels at +3.97% above the benchmark. Today’s 7 most widely held stocks in the sector join a prized group of just 15 companies that have ever been owned by more than 20% of funds at any one time. Dubbed the 20% Club, 8 of these stocks have since left, with Luzhou Laojiao the most recent entrant. The remaining 6 stocks are Kweichow Moutai (the highest conviction holding), China Mengniu Dairy, China Resources Beer, Wuliangye Yibin, Inner Mongolia Yibin and Tsingtao Brewery.
Edition: 163
- 23 June, 2023