Should I Buy Diageo or SABMiller?

LONDON -- I believe that having emerging-market exposure in your portfolio is essential, but like many investors, I don't fancy the hassle and risk of trying to buy shares listed on the stock exchanges of African and Latin American nations.

Luckily, there is another way. The FTSE 100 contains a number of companies whose earnings come from these countries. Two great examples are Diageo (DGE -0.25%) (DEO -0.07%) and SABMiller (LSE: SAB) (NASDAQOTH: SBMRY), which sell spirits and beer, respectively, and have global operations providing exactly the kind of emerging-market exposure I'm looking for.

Diageo vs. SABMiller
I'm going to start with a look at a few key statistics that can be used to provide a quick comparison of these two companies:

Both companies have delivered solid growth over the last five years, and their share prices reflect this. Diageo's shares have risen by 98% since May 2008, while SABMiller's share price is 202% higher than it was then.

Both firms' dividends have grown faster than inflation, but the pace of their share price growth has been such that they both offer yields of about 2% -- well below the FTSE 100 average of 3%.

What's next?
Diageo and SABMiller have both benefited from substantial sales growth in emerging markets in recent years. Can they sustain this rate of growth, or is some slowdown inevitable? Analysts' forecasts are notoriously unreliable, but FTSE 100 companies generally get the benefit of the most comprehensive analysis, and they tend to deliver fewer surprises than smaller companies.

With that in mind, let's take a look at some forward-looking numbers for Diageo and SABMiller. These apply to the companies' current financial years:

SABMiller's financial year ended on March 31 (it hasn't reported yet), while Diageo's ends on June 30, so there should be few surprises in the firms' annual results when they are published.

Given this, it seems a safe bet that both companies will report another year of strong growth in fiscal 2013, although it is worth noting that Diageo's chief executive, Paul Walsh, is about to retire after a 13-year stint. The firm's choice to succeed him is Ivan Menezes, Diageo's current chief operating officer. Menezes should provide good continuity, but there is always the possibility that a change of leadership will coincide with a change of fortunes for the firm.

Which share should I buy?
The downside of the success of Diageo and SABMiller is that they have become quite expensive for new investors. Both firms are on my personal watchlist, and I intend to add one of them to my portfolio at some point in the future. But for my style of investing, which is based on income and value, they both look too expensive at present.

Growth investors may take a different view, and I agree that the share price momentum of both firms could continue for some time yet. If I were to buy one of these shares today, it would be Diageo, as it offers a higher yield and has not experienced the same dramatic share-price growth as SABMiller over the last five years.

The top growth stock for 2013?
If investing in strong growth stocks like Diageo and SABMiller appeals to you, I suggest you take a look at one U.K. stock that outperformed the FTSE 100 by 32% in 2012 and has delivered earnings-per-share growth of 44% since 2009. It has already powered ahead of the FTSE 100 in 2013, but it currently trades on a forward P/E of just 14.

You can find full details of this company -- which the Fool's analysts believe could be seriously undervalued -- in this free report: "The Motley Fool's Top Growth Stock For 2013." Just click here to download your free copy now, but hurry -- it will only be available for a limited time.