DIAGEO PLC ADRs $119 - New York symbol DEO

DIAGEO PLC ADRs $119 (New York symbol DEO; Conservative Growth Portfolio, Consumer sector; ADRs outstanding: 627.2 million; Market cap: $74.6 billion; Price-to-sales ratio: 4.3; Dividend yield: 2.3%; TSINetwork Rating: Above Average; www.diageo.com) is buying 53.4% of United Spirits Ltd., India’s largest maker of alcoholic beverages. This business also imports and distributes drinks made by companies outside India.

Diageo will pay $2.1 billion for this stake when the deal closes in the first quarter of 2013. That’s equal to 3% of its market cap.

Expanding in fast-growing markets like India improves the company’s prospects. However, the stock has gained 40% in the past year and now trades at nearly 20 times Diageo’s earnings. That makes it vulnerable to a sudden drop if earnings growth slows.

Diageo is a hold.

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