Tesco shares hammered

gadgetmind

ses6jwg wrote: »

I thought Greggs was a better bet. He thought Tesco.

I've never had an issue with doubling-up in sectors. If two companies both have well-covered yields, reasonable gearing, etc., then why not?

As it happens, I think Tesco has been heavily over-sold and may add alongside my Sainsbuy holding.

rockitup

Yeah it looks like Tesco won't be making any quick recovery in share price after reading the articles about them not expecting to grow their profits for 2012/13 so may have to hold for long term anyway, my average price to break even is now £3.62 so a couple of years divi's and a little growth will hopefully get the price past that level.

jayship

For a quick return it is a good price. I have bought some today and it is showing a small profit. If the price is right may flog them later today.

atush

ses6jwg wrote: »

Have you walked past a Greggs lately at 1pm?

They're full of every type of individual you could think of, increasingly the suited and booted.

That would be my point no1, the downsizing lol.

Glen_Clark

They are now on a price earnings multiple of 8.76, so thats 11.4% return on capital. Even if profits were cut by half thats still 5.7%., considerably more than you could get in a bank account.
But for me the good news is that the price crashed after the bad news. Which suggests that nobody had inside knowelege to sell before it was announced, as it usually the case. So the small investor without inside knowlege, gets a fairer chance.

Ten98

Absolutely fantastic time to buy if you have the cash... TSCO has been hugely undervalued at 400p, the market cap of its UK property portfolio alone without even taking into account the retail business is worth easily 300p a share by itself.

As an employee and shareholder, The dip to ~320p has certainly come as a bit of a shock. We were all expecting a minor dip as speculative investors read the headlines about a less than amazing Xmas trading period, but this is clearly a panic sell by uninformed shareholders.

Lets make things absolutely clear, Tesco have not reported making losses over the Xmas period, or even that company profits have reduced, because they haven't, in fact Tesco as a whole has grown by 5%, when most retailers have shrunk overall. What they've reported is that compared with last year, if you strip out the effects of inflation, building new stores and the VAT increase, sales in the UK in December are 2.2% lower than the same time last year.

Big deal.

The sell-off is a reaction to the story and the way it has been reported in the media, not the actual performance of the company, which remains superb.

Tesco will post the same full-year results it always does to the city later on this year, showing a hugely respectable 5% growth, driven not by the UK Grocery market, but by rapid expansion into Central Europe, Asia and the US. Fun fact: The share dividend is based on the whole company performance, not just UK Grocery.

The sad fact is, that Tesco posting good financial results to the city is a non-story in the UK media. It happens twice a year, regular as clockwork and they seem to have got bored of reporting that amongst all the doom and gloom of the Financial Crisis, a British company is actually doing well. Instead they seize on the chance to blow one slightly underwhelming Xmas out of proportion...

So, if you can bear the wait for the market to correct after a series of boringly excellent full-year and half-year results when most other retailers are posting losses and some are closing entirely, perhaps 3 or 4 years, we will see 500-600p again.

Finally, to answer the previous posters concern that investment in the company is cap ex. and should not equal lower profit? True, but in Tesco's case it does, as you can't spend money on refurbishing shops without at least partially shutting them, and you're not allowed to build a new shop in the UK without closing or demolishing an old one, so any serious investment in the UK costs both in terms of cap ex. and revenue at the same time. This level of detail is sadly stripped out of news articles.

sabretoothtigger

I bought Sainsbury instead, higher yield and cheap as its ever been pretty much. Questor reviewed both

Glen_Clark

Ten98 wrote: »

Finally, to answer the previous posters concern that investment in the company is cap ex. and should not equal lower profit? True, but in Tesco's case it does, as you can't spend money on refurbishing shops without at least partially shutting them, and you're not allowed to build a new shop in the UK without closing or demolishing an old one, so any serious investment in the UK costs both in terms of cap ex. and revenue at the same time. This level of detail is sadly stripped out of news articles.

Surely investment in stores will not lower profits because it will result in a corresponding increase in the value of assets?

Not saying Tesco isn't a good buy. I have just bought more today at £3.16. Since I was prepared to pay £3.25 yesterday, (and Warren Buffet paid £3.77 for his) why would I not pay £3.16 today.
Just that I think Tesco has got so big it cannot keep growing and increasing profits at the rate we have come to expect. But if it keeps them anywhere near where they are now I shall be happy to keep them and enjoy the dividend, irrespective of the share price.

Rupert_Bear

I assume now its not only big price drop but big share drop as well. Think they got that wrong. In my home town their are now 14 Tesco's. Its good to see them getting some of their own medicine. Lets give the small traders a chance.

Glen_Clark

sabretoothtigger wrote: »

I bought Sainsbury instead, higher yield and cheap as its ever been pretty much. Questor reviewed both

I bought Sainsbury as well but according to google;
Tesco price earnings ratio is 8.76
Sainsburys price earnings ratio is 9.11
does that not make Tesco cheaper than Sainsburys?

I don't know which yield you mean. I took it to mean the dividend yield - percentage paid out in dividends, But surely the earnings are more important than the dividends?
The bust banks were still paying good dividends when they had no genuine earnings, which was only good until they went bust.