From Diageo to Alphabet: the value investor's dilemma between dividends and AI

From Diageo to Alphabet: the value investor's dilemma between dividends and AI

Three years building a portfolio of real-economy stocks and a handful of traditional compounders. Suddenly, Alphabet appears on the radar as the great growth alternative. It's the same tension running through conservative portfolios in the middle of the AI era: hold on with beaten-down dividend payers or jump on the tech train, even if it means selling positions at a loss.

The 7-stock portfolio and its weak points
The portfolio, concentrated in seven positions, leans on two crutches: Diageo and Bunzl together account for 42% of the total. Diageo, bought at an average of £15, is seen by its owner as a long-term bet: he trusts the company will trinc the path of tobacco and reinvent alcohol-free consumption. Against it, some see a structural shift in drinking habits and a P/E of 20 that doesn't invite patience. Nike, at an average of $52, is the main pain point: competition in China and a valuation the investor himself admits is excessive. MicroStrategy, down 60%, remains a footnote given its minimal weight.

Alphabet, the AI siren song
The most talked-about alternative is Alphabet. Its defenders point to a near-90% monopoly in search, a cloud business growing above 30% a year, and massive investment in AI, including a stake in Anthropic. Not even the entry price seems to put them off: Berkshire Hathaway already added to its position at $350. The counterpoint exists too: if people end up searching directly with AI, Google's advertising business could suffer. A risk the investor himself has on his radar before deciding whether to sell Nike at a loss to get in.

And in the background, small caps
The desire to accelerate returns pushes him to look at small caps. Other people's experience, however, is a warning: small companies that miss expectations can crash for years. Mining stocks, with a diversified selection, are compared to a lottery with slightly better odds. Mayer's book «100 baggers» appears as a guide, though it's admitted that the lack of a clear framework is the main obstacle.

The debate remains open at the exact point where many portfolios get stuck: not enough conviction to let go of the beaten-down stocks, nor to fully embrace growth. Meanwhile, prudence calls for a clear plan and consistency. The stock market, as almost always, doesn't forgive indecision.