Tesco shares - worth a punt?

[wasabi]

http://www.bloomberg.com/news/2014-1...ndholders.htmlThey're in the doldrums - only way is up after a few sell-offs and redundancies?

[TeePee]

The moves increase pressure on Chief Executive Officer Dave Lewis to raise capital quickly, either by selling assets or offering shares to existing stockholders. At five times earnings before interest, taxes, depreciation and amortization, according to Moody’s, Tesco has the highest financial leverage of any U.K. supermarket.

Going to have to no. Too high risk for me.

[Saracen]

For me, no. But it's not a reflection on their investment potential, or risk level. It's that being treated badly by Tesco means I won't buy a pint of milk in there, let aone shares. And haven't for years.

The shares may possibly be a good buy BUT .... two words, Marks & Spencer. Just because Tesco were market leader, were the golden boys, doesn't mean they will be so again.

Another word ... well, acronym .... IBM.

Take a judgement. What did Tesco get wrong? IMHO, they failed to adequately see, and adapt for, changing market conditions. They, apparently, failed to understand the seriousness of the financial crash and resultant changes in buying patterns. Or, misjudged the scale, depth and duration of changes in shopping patterns, or of the threat ftom Aldi/LIDL, etc.

I remember talking to a supermarket branch manager during a store refit, several years back. I queried why they kept the store open, despite huge disruption to both customers and refit crews. Wouldn't it be better to just close for a few days, and get it over with efficiently, rather than have two or three weeks of mess mixed with customers?

He told me that at his previous, and much smaller, branch, they did just that. Closed for a week to get everything done as fast as possible and not affect customers. Trouble was, customers wanted to shop during that week, and since they were closed, the customers went 100 yards down the road to a competitor. And about 35% never came back.

People, he told me, are for the most part creatures of habit. Once you've got them, habit, comfort zone and routine tend to keep them coming back, over and over. Unless you break the routine .... like by closing for a week. So, never ever encorage them to break routine. It's a large part of what loyalty/reward cards are about. That, and data mining, but that's for a different thread.

So, back to Tesco. Now that LOTS of people havd tried Aldi/LIDL and found, hey, product quality is often pretty good and so are prices, well, the Tesco habit is broken.

It MIGHT be a mistake to think that Tesco can necessarily revamp their offering and those that have left will come flooding back. And even that is assuming the get the revamp formula right. M&S are still trying to do that.

Maybe Tesco fortunes will pick up and shares will pick up. Or maybe the current price accurately reflects a new long-term reality.

Ultimately, your question can best be answered with another simple question ....

<Best Clint Eastwood voice on>

Do ya feel lucky, punk? Well, do ya?

<Best Clint Eastwood voice off>

[TheAnimus]

No way, they massively over expanded, and got hurt by this, meanwhile they lost their position in the UK market, the most valuable customers left to Waitrose as they expanded, and Sainsburys as they bought Jamie Oliver.

[Smudger]

For all they're supposed to be great value, etc, I've found that they're actually quite expensive, compared to Morrison's etc. I think perhaps they were, then they thought 'hey people are coming anyway, we don't need to be cheap any more' and now shoppers are realising that they're being stiffed. At least Waitrose are expensive but good. Shopping at the big Tescos just makes me depressed.

Edit: So no, I don't think they're going to get back to the position they were in, so their shares probably aren't good value.

[csgohan4]

I previously shopped at Tesco 5 years ago, but then found Sainsbury, much better quality and often cheaper.

As someone said earlier, Tesco failed to adapt although to a lesser extent to Morrison's/ Coop the latter got into the local store band wagon too late.

Tesco was good earlier as they sold more than just food stuffs like car stuff and bedding e.t.c. Now a lot of their competitors caught on and offers goods from vacuum cleaners to Televisions.

Haven't checked out Aldi/Lidl yet, anyone tried and thought it was decent?

[Smudger]

Yep, most stuff is the same quality, and they even package with similar (but definitely not the same, oh no) packaging, so you know what you're getting...

[Gerinako]

Would not like to call the bottom for Tesco

Over expanded and facing competition from Supermarkets (Aldi/Lidl) who aren't under pressure to return such high profits for shareholders.

[wasabi]

Would not like to call the bottom for Tesco

Over expanded and facing competition from Supermarkets (Aldi/Lidl) who aren't under pressure to return such high profits for shareholders.

Dividend yields have historically been solid but not outstanding (4.5 to 6.5) percent region. The Aldi / Lidl factor is probably the biggest concern and not the old enemy Sainsburys. Yet are they really only worth half what there were a year ago, or are they undervalued?

[Top_gun]

Tesco could well be the mother of high street crashes. To some this may sound unthinkable until you start to explore why the company decided to ramp up debts to fuel aggressive company expansion. You know Tesco is seriously in trouble when a credit rating agency decides to downgrade its rating to one notch above junk status. Only a complete idiot would consider investing in Tesco now.

[The Hand]

I'm going to wait for £1.00 myself before buying! If it's in free fall though I may buy lower. Tesco has a lot of assets property etc so I don't expect complete wipe out for them.

[Saracen]

....

Only a complete idiot would consider investing in Tesco now.

I wouldn't go that far.

I think the critical bit is in the thread title ..... "worth a punt".

Of course, I don't know for sure what wasabi has in mind, but I take "have a punt" as being shorthand for a highly speculative gamble, fully aware they may lose value, much in the sense that I, as someone that can barely tell the front end of a horse from the back, might decide to have a £5 punt on a 100-1 outsider in the Grand National because I like the horse's name. I'm aware I'll probably lose the fiver, and if so, oh well. But if it comes in?

In other words, are Tesco shares a rational buy in a risk-averse investment strategy? Hell no. But, a "punt"? Depends if "ya feel lucky?"

[wasabi]

I'm going to wait for £1.00 myself before buying! If it's in free fall though I may buy lower. Tesco has a lot of assets property etc so I don't expect complete wipe out for them.

They've jumped back up by about a percent today.

[Top_gun]

I wouldn't go that far.

I would. There are two ways to assess value of shares: fundamentals or technical analysis (charts). Both methods doesn't favour Tesco at all. In order to assess fundamentals you need to have reliable information such as profits (oh dear), debts, etc and at the moment Tesco has a reputation problem with investors because of the overstated profits. Tesco's charts is in free fall with no sign of bottoming out.

I think this Telegraph article - five reasons not to buy Tesco shares sums up Tesco rather well.

In other words, are Tesco shares a rational buy in a risk-averse investment strategy? Hell no. But, a "punt"? Depends if "ya feel lucky?"

Gambling is not the same as investing. However a good investment strategy could be "shorting" on Tesco shares instead of going "long".

[The Hand]

They've jumped back up by about a percent today.

Yes, I won't be buying soon. They may enjoy some kind of Xmas rally, but remember in January 2012, when "disappointing" results for Xmas 2011 were announced, there was a 25% drop in the share price. Warren Buffett has also said he made a huge mistake with Tesco which will further undermine confidence.. No one knows where bottom is, but that said, I personally think the Aldi/Lidl effect is still building. I wouldn't be too surprised if the Tesco share price carries on down.

[HalloweenJack]

problem with a big crash at Tesco would be a knock on effect for the entire sector and all the way down the supply chain.

how would I turn it around? IMO of course ; copy france - far greater ability to negotiate with the producers - take everything for a lower price than the highest quality and throw the rest. sell the random `bits` really cheap , you know, the odd shaped veggies> and make the highest quality items even higher quality. take the discounters on by the throat , and go by the original ethos ` stack em high and sell em cheap`.


and more staff on the shop floor - no queues at the tills , staff working stock yes , but enough of them about - and happy ones who are happy to help not moody ****s.