I’ve owned shares in Diageo for many years.  I inherited them from my father who used to work in Guinness.  But with the stock down by more than a fifth this year, and the chief executive leaving, is it past time to sell?  The rest of my money is mainly in cash and a couple of other shares like CRH and BP.

– PB, Co Waterford

Diageo is a classic blue-chip stock: a global drinks giant with operations in nearly 180 countries, selling brands like Guinness, Johnnie Walker, and Smirnoff vodka. For many Irish investors, it holds sentimental as well as financial value – Guinness is at its heart, and has been one of its best-performing brands even as the wider business has come under pressure in recent years.

You’re right to ask tough questions after its run on the stock market. Diageo’s share price has fallen around 20% over the past six months. That’s largely down to weaker-than-expected sales in Latin America and Africa, inflation eating into profit margins, and a serious post-Covid hangover (off-licence sales boomed when the pubs were shut).

Last week came a change at the top – chief executive Debra Crew is stepping down after a relatively short tenure.

So should you sell?  Let’s take a closer look.

Is Diageo fundamentally broken?

Not really. Diageo remains a highly profitable global company. It’s in a sector – premium consumer goods – that tends to be resilient over the long term. People may change how they drink or spend during economic shifts, but premium brands with pricing power usually bounce back.  And Diageo has some of the greats in many categories, from Gordon’s gin to Baileys in liquers and Captain Morgan’s in rum.

The company pays a solid dividend, has a strong market share, and has returned to growth. To some investors, the recent dip could represent a buying opportunity – not a reason to sell.

But before you order another, it’s worth taking a step back to consider your wider wealth.

Consider your broader portfolio

You mention that most of your other wealth is in cash, CRH, and BP. That’s a narrow spread – with heavy exposure to large-cap UK and Irish shares, and a lot sitting on the sidelines at the bank.

We’d suggest diversifying. Holding a single drinks company, a building materials firm, and an oil stock leaves you exposed to a few specific sectors.  As Diageo’s experience suggests, if one of those companies, or sectors, runs into trouble, it can have a major effect on your overall situation.

What’s more, you are missing out on some sectors which have been key to investment growth over recent years such as services (for example Amazon), and technology (for example Apple).

Building a broader portfolio – including global equities, bonds, and other assets – can reduce your risk and improve long-term returns.  We’d suggest doing this via one or several investment funds.

It’s not just a financial decision

Finally, it’s worth recognising that Diageo shares carry emotional value for many Irish investors. They’ve often been inherited from people with long links to Guinness. That doesn’t mean you should never sell, but it might mean you keep a portion of them as a legacy holding, while making sure the rest of your money is working as hard as it can.

Unless you urgently need the money, there’s no rush to sell Diageo.  The losses in the first half of this year have already been incurred.

Instead, we’d propose reducing your holding (and those in BP and CRH) in a planned way to diversify your wealth into investment funds with wider exposure.  A more diversified portfolio will give multiple opportunities for your money to grow in the coming years, and make you less reliant on the fortunes of any one company.