After crashing 20% in a year, is this 1 of the best UK shares to buy now?
There are some familiar names towards the top of the league tables of the best performing UK shares over the past 12 months. For example, Rolls-Royce Holdings and Lloyds Banking Group sit comfortable in the top 5% on the FTSE All Share index.
But I reckon better opportunities often lie at the other end of the table. Here, some fallen giants can be found. These include some well-known names that could be about to turn things round. Hereâs one that I think (and some analysts believe) could be a great recovery buy for 2026.
Cheers!
According to the consensus of the 12 analysts covering the stock, Diageo (LSE:DGE) is currently (5 February) 13% undervalued.
And in City AMâs annual survey of brokers, three have tipped the stock as the one to watch for 2026. Central to their thinking appears to be the arrival of Sir Dave Lewis, who took over as the groupâs new boss at the start of the year. Indeed, the website itself says it would be a âbrave personâ to bet against âDrastic Daveâ replicating his Tesco success with the drinks giant.
Such is his reputation, when his appointment was announced on 10 November 2025, the groupâs share price closed 5.2% higher. However, the âLewis effectâ was short-lived. Since then, itâs fallen approximately 1%.
Thatâs probably because investors want to see evidence that heâs making progress in overcoming the many challenges that the group faces. These include Gen Zers apparently drinking less than their parents and fears that weight-loss drugs could usher in a new era of healthy living. Tariffs have also affected the company in America and its debt pile is on the high side.
The first evidence of whether Diageoâs turnaround strategy is working will come on 25 February, when the groupâs due to release its interim results for the six months to 31 December 2025.
And if Sir Dave can deliver, shareholders will no doubt embrace the companyâs motto: âCelebrating life, every day, everywhere.â
| Financial year | Net sales growth (%) | Basic earnings per share (cents) | Free cash flow ($m) |
|---|---|---|---|
| FY25 | (0.1) | 105.9 | 2,748 |
| FY24 | (1.4) | 173.2 | 2,609 |
| FY23 | 0.2 | 196.3 | 2,235 |
| FY22 | 19.3 | 184.6 | 3,779 |
| FY21 | 16.1 | 153.8 | 4,106 |
In its favour
However, despite its well-documented struggles, based on retail sales value, it remains number one in the world (its brands can be bought in 180 countries) for whisky, tequila, vodaka, gin, liqueurs, and non-alcoholic spirits.
Impressively, it also has $13bn brands in its portfolio. Due to their size, it only takes one of these to replicate the recent success of Guinness and everything could look very different.
And with over 200 brands it also covers all price points, which I think is the key to the groupâs recovery. Itâs observed a trend of consumers moving more up-market with their choice of brands. Here, Diageoâs well placed to benefit.
| Price tier | FY25 sales (%) |
|---|---|
| Value | 8 |
| Standard | 30 |
| Premium | 37 |
| Super-premium | 16 |
| Ultra-premium | 5 |
| Luxury | 4 |
| Total | 100 |
Interestingly, Waitrose recently reported that âDry Januaryâ is becoming more of a âDamp Januaryâ, with customers drinking moderately rather than quitting altogether. Until it becomes clearer as to how tastes and attitudes are changing, I think it pays to have a larger portfolio.
In my opinion, Diageo definitely qualifies as a fallen giant. But I think the good times will return again. I donât subscribe to the âtoo big to failâ theory but I think, in this instance, its sheer size is going to help its recovery.
The post After crashing 20% in a year, is this 1 of the best UK shares to buy now? appeared first on The Motley Fool UK.
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James Beard has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Diageo Plc, Lloyds Banking Group Plc, Rolls-Royce Plc, and Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
