Where The Boss Of Diageo Is Investing Now

Published in Company Comment on 7 December 2012

Diageo (LSE: DGE) boss Paul Walsh is backing a blue-sky AIM share.

Paul Walsh must be one of the most accomplished chief executives presently serving within the FTSE 100 (UKX).

Appointed to the top job at Diageo (LSE: DGE) (NYSE: DEO.US) back in September 2000, Mr Walsh has since delivered wonderful returns to loyal shareholders.

During the last 12 years or so, earnings at the drinks group have risen from 37p to 78p per share while the dividend has advanced from 21p to 43.5p per share.

The progress has helped push Diageo's share price from 588p to a recent high of 1,878p. During the same time, the FTSE 100 has slumped from 6,673 to around 5,900.

When you consider most blue-chip leaders last about five years in their jobs before they retire, move on or get sacked, Mr Walsh's tenure and results mark him out as somebody who knows a thing or two about business.

So where is Mr Walsh investing today?

Well, it's not Diageo.

In fact, a recent statement revealed Mr Walsh had sold 20,000 Diageo shares at 1,850p and raised £370,000.

Furthermore, statements earlier in the year showed him giving away 15,000 shares, selling a further 50,000 shares for £768,500, and exercising 90,000 options to raise more than £1m.

Instead, it is the shares of Avanti Communications (LSE: AVN) that have attracted Mr Walsh's attention. He joined the company's board as a non-executive at the start of the year and has since spent about £180,000 buying the shares at an average price of roughly 262p.

Avanti doesn't exactly offer the track record of Diageo. This AIM-traded satellite operator joined the stock market during 2007, has reported operating losses ever since, while the recent 230p share price is a fraction below the flotation price and well below the 735p all-time high.

Nonetheless, Avanti may offer rich growth possibilities -- the £260m market cap is supported by the expansion potential of the group's high-speed broadband satellites. One currently serves Europe, a second was recently launched over the Middle East and a third, due for 2015, will serve Africa.

Blue-sky story

The investment theory is simple. Covering areas with little or no fixed-line telecom services, Avanti's satellites may become real money-spinners in the years to come. Indeed, results during October showed the firm's contracted future revenues had already reached £268m, although reported sales were just £15m.

The figures also revealed net debt of £100m.

All told, it seems Mr Walsh sees Avanti as a good high-risk, high-reward gamble. In fact, he already owned Avanti shares before his appointment to the group's board.

Do note, however, that Mr Walsh's pay and bonuses from Diageo last year came to £3m, so his £180,000 investment should be seen in that context.

Should you follow Mr Walsh?

Of course, whether Mr Walsh's business record, his investment in Avanti and the prospect for broadband satellites in general make Avanti a 'buy' remains your decision.

Indeed, you may wish seek help from this free Motley Fool report, which explains the factors you need to consider -- and the risks you might encounter -- when evaluating smaller AIM-traded shares.

You see, the junior market has always provided its fair share of genuine multi-baggers and promising growth stories that can persuade even the most cautious of investors to take a wild punt.

Anyway, if Avanti is tempting you today, please click here to read the Fool's exclusive Millionaire report before you hit the 'buy' button.

> Maynard does not own any share mentioned in this article.

Share & subscribe


The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.


There are no comments yet - why not be the first?

Join the conversation

Please take note - some tags have changed.

Line breaks are converted automatically.

You may use the following tags in your post: [b]bolded text[/b], [i]italicised text[/i]. All other tags will be removed from your post.

If you want to add a link, please ensure you type it as http://www.fool.co.uk as opposed to www.fool.co.uk.

Hello stranger

To add your own comment, please login.

Not yet registered? Register now.