Tesco shares

monkeyman311285

Hi
I am just looking for the views of others.

I currently have 5k sitting in a cash isa and i am not happy with the return.
I am considering buying shares in tesco and wanted to know others opinions.

my reason for buying in tesco is the consistent divident and sustained profit margins.
i am looking to invest for at least 2 1/2 years.

thanks

leahciM

Few things....

Tesco are indeed a strong, dividend paying company. Currently experiencing strong growth abroad and a good 'moat' in the UK. Furthermore, the company is a strong defensive play as people will always be looking to buy groceries at cheap prices- regardless of what the economy is doing.

However

2 1/2 years is really not enough time to invest for - is this date specific? What will you do if tesco has a 'BP Moment' and the shares drop by 50% just as you need to sell out?

Also, and for pretty much the same reasons, just buying into Tesco means all your eggs into one basket and if it goes down, your entire investment goes down.

Just a thought.

monkeyman311285

hi
Cheers for your input.
The date was not totally specific. Just a minimum as in the long term it will be for used as a deposit for a house but i carnt see that happening for at least 5 years.
I take on board want your saying about having all my eggs in one basket.
I guess i should look at doing some fund research instead of individual shares.

Loughton_Monkey

Agreed ^^

All eggs in one basket is never a good idea.

Tesco is a good company on the face of it, and 'blue chip'. In no way am I suggesting this will happen, but it is not beyond the realms of possibility that:

Stage 1: Tesco's 'known' tax avoidance schemes become a bit more of an issue, and the government gets a bit strong and challenges them in court, and sends them a stiff bill for 6 years unpaid tax. Share price wobbles.

Stage 2: The Press gets the bit between their teeth and puts feelers out for new 'dirt'. They are caught buying 'Fair Trade' stuff [which we all have heard is just a 'front' and they are actually picked by slave local labour when the 'man from delmonte, he gone'] but more importantly it is shown that they know this. CEO has to resign. Share price wobbles even more.

Stage 3: The smelly brigade - who are averse to their store 'development' processes anyway - organise themselves to picket every single Tesco in the land. White vans, tents, and (worse) 'folk singers' set up camp in every Tesco Car Park. Share price falls almost to floor.

Stage 4: Waitrose Asda and Sainsbury, are now making so much money that because their prices go up, and when Tesco has dragged itself off the floor and starts trading 'normally', they are simply priced out of the market by more 'fat' competitors. War of attrition of their most feared rival. Share price now at 10½ pence and no dividend.

Stage 5: Replacement Tesco CEO caught on Hampstead Heath in the small hours, not a million miles away from George Michael, .......

Do I need to go on? [I'm enjoying it...]

monkeyman311285

I take on board what you are saying,
I think that i should spend some time attempting to find information on funds instead of individual shares as on reflection i may not be prepared if a share which i had invested in lost significantly in value.

cheers for your opinion.

leahciM

I'm a big fan of index trackers; especially for relatively new investors. Low total expense ratios (compared to managed funds) and you get a nice level of diversification.

You won't get multi-bagger returns, but you'll (almost) certainly beat the top going ISA rates at the moment.

Just as a suggestion, why not check out HSBC's index tracker - low total expense ratios and there's some wide ranging funds.

I'm currently diversified into UK mid caps, US blue chips, Asia Pacific including Japan and BRICS (though this isn't with HSBC), all for some very low prices.

Might not be for you, but thought it was worth mentioning.

jimjames

leahciM wrote: »

I'm a big fan of index trackers; especially for relatively new investors. Low total expense ratios (compared to managed funds) and you get a nice level of diversification.

You won't get multi-bagger returns, but you'll (almost) certainly beat the top going ISA rates at the moment.

Just as a suggestion, why not check out HSBC's index tracker - low total expense ratios and there's some wide ranging funds.

I'm currently diversified into UK mid caps, US blue chips, Asia Pacific including Japan and BRICS (though this isn't with HSBC), all for some very low prices.

Might not be for you, but thought it was worth mentioning.

I'd agree with that. Index trackers are a good way to get started investing in funds at low cost and starting with low monthly payments without needing to worry if the manager is going to perform better than the index.

monkeyman311285

Cheers for your opinion.
Would you say this option would suit a lump sum of 5k and..
Can i ask (1)why you would invest in an index tracker, which would follow the total market and not a self-select fund which cheery picks elements of individual market?
cheers

leahciM

Monkeyman - I totally understand your reservations about Index trackers - I had the same before they became a significant part of my portfolio.

The following are just my ideas - please don't take it as anything other than the suggestions of a stranger you've met on the internet.

Personally, if I had 5k lump sum and was not planning to add to it through a regular savings scheme, then I would suggesting splitting it between three or maybe even four funds in roughly this way:

FTSE All Share 30%
US S&P 30%
Euro Index 30%
Asia Pacific excluding Japan 10%

That'd give you a nice split diversified in most regions for your cash.

In terms of selecting individual sectors - that's the next focussed step from picking index trackers. So you need to decide whether you want to take that extra effort to research which sector is most suitable.

Loughton_Monkey

monkeyman311285 wrote: »

.....Can i ask (1)why you would invest in an index tracker, which would follow the total market and not a self-select fund which cheery picks elements of individual market?

This is a perennial debate. And strangely, I don't think the argument has ever been 'proven' one way or the other. You will hear lots of research from the fund manager lobby that 'proves' their managers get a bigger return - more than justifying their 1.5% (or whatever) charges.

Other people will 'prove' that the lower cost tracker beats the 'managed' funds.

It's a very difficult thing to prove. A lot depends upon the period. An index like FTSE100 is very heavy in banks. So do the research over a period when banks really go ballistic, then FTSE100 tracker will outperform a more balanced fund.

Personally, I have a view that the 'optimum' fund would be a tracker overlaid with a few ounces of 'common sense'. In other words, balance it a bit more by sector. Take out the real known 'dogs'. Take a few dynamic looking shares from the FTSE250.... and I reckon that would be 'worth' another 0.25%. So such a fund at 0.5% might outperform the lot. Just a hunch.

But the fund managers claim they do the job in trumps. Extremely detailed fundamental analysis. Personal visits to query strategy. Keep abreast of wider economics...... Hence their enormous charges.

Make your own mind up!

Eco_Miser

monkeyman311285 wrote: »

I currently have 5k sitting in a cash isa and i am not happy with the return.
I am considering buying shares in tesco and wanted to know others opinions.

You don't mention it, but I presume you're going to transfer the £5k to a S&S ISA and buy the shares or whatever within it, rather than take the cash and buy shares.