Future of tesco, morrisons

Minrich

I thought about loading up at £2.50 , a year ago they were £3.75 , 6% nearly in divi , but now they are £2.46 as you say !
We already have 20000 of them , so do we buy more at £2.46 ish ? MMM

Another 20000 would only cost £50k and then what ? £3k a year in divi but what about the actual price , surely they are well under valued now if you look at Sainsburys price ??

Minrich

Well just got a few more 6000 @ £2.46 , lets see what happens now , we have bought shares in the past at nearly £4 , so this should counteract some of those ! Sort of

bowlhead99

I see where you're coming from but f you have a large exposure to one particular company, (per your other posts):

A) one of you relies on them for employment and
you have already acquired a large stash of their shares over the years from share save.

Then, investing £15k+ in them does not "counteract" any of your shares bought at £1 or £3 or £4. It *adds* to your exposure to this company. You now have a £15k higher exposure to it than you did at the weekend.

You may decide that is exposure that you want, but others would say you don't counteract bad decisions by buying more of the same at a lower price. You are buying more hoping for greater gains, which is not a risk reduction strategy.

Also the 6% yield you talk about: is that your estimate of the cash flow that they will be able to pay out for the next 5 years from their future profits that you have reliably estimated, or simply a snapshot of a recent dividend against today's price?

2010

I don`t think tesco`s share price will improve until they show signs of sales increase, which is not happening thanks to Aldi and Lidl.
They`ve now woken up to the fact that it`s all about prices and convenience.

From an investment point of view there`s a good chance Tesco will cut the dividend, which won`t help the share price either.
I think the share price has further to fall.

bowlhead99

Recent article in Fool commenting that city forecasts for 2015 Tesco divs were ~ 13.8p which is something like 5.5% depending where the price moves next.

They also made the point that Tesco is the only one of the big 3 uk listed ones to regularly offer a scrip divi which in theory makes it easier for them to preserve divi "payout" compared to Morrison or Sainsbury. If Morrison don't cut the divi significantly they will be paying out more divi than they are actually projected to earn, which isn't good for cash reserves.

Minrich

bowlhead99 wrote: »

I see where you're coming from but f you have a large exposure to one particular company, (per your other posts):

A) one of you relies on them for employment and
you have already acquired a large stash of their shares over the years from share save.

Then, investing £15k+ in them does not "counteract" any of your shares bought at £1 or £3 or £4. It *adds* to your exposure to this company. You now have a £15k higher exposure to it than you did at the weekend.

You may decide that is exposure that you want, but others would say you don't counteract bad decisions by buying more of the same at a lower price. You are buying more hoping for greater gains, which is not a risk reduction strategy.

Also the 6% yield you talk about: is that your estimate of the cash flow that they will be able to pay out for the next 5 years from their future profits that you have reliably estimated, or simply a snapshot of a recent dividend against today's price?

I see where you are coming from , to us the divi is important as this extra £15k will give about £800pa income . I would never say that owning Tesco shares are a bad decision , it is a company struggling at the moment due to a slight downturn. They have the best Internet Delivery Service , their 1700 odd Smaller stores are scattered everywhere and have large swathes of Land free for housing development , which is a way of offloading their banked land which they planned future expansion . I am also quite enthusiastic about their involvement in India and China . Their Banking side is also quite good and only can benefit the Company bottom line .
The problem with Tesco is to regain support from the Public via the Media and this is a big struggle , it is a massive business in the UK and employs , i am told 500,000 people .
If it wasn't for their Staff discount i know staff would shop elsewhere too .
They need to get back to basics and really re negotiate with their suppliers as Lidl/Aldi sell the same products 20% cheaper than Tesco , how is that possible ? Pile it high sell it cheap at the Megastore/Superstores would be my advice , let the convenience type stores prop up this huge stores . Let them trade at break even perhaps for a 2/3 year period , would have a dramatic effect on Lidl/Aldi ?

Thrugelmir

planteria wrote: »

as things stand though, i think i still fancy adding to Glaxo and/or buying Unilever or Diageo instead.

I bailed out of GSK in March once the smell started coming from China.

On a broader note. There's very little of value. Company results are on the whole disappointing. Instinct is telling me that there's a correction ahead. About time there was a shake out. So i'm holding cash for the time being.

Minrich

On a similar note on price my parents used to run a large Supermarket , not like Tesco or Sainsbury but more like a big local Co-op or similar . We used to get stock from Tesco as they were cheaper , by far than Cash and Carrys . It used to be possible to buy all the stock on the shelves , not possible now as there are limits to how much people can have . We bought 150 Frozen turkeys one year , took them back to their store and rebagged them , each one 100% profit - Happy Days

2010

Minrich wrote: »

Pile it high sell it cheap at the Megastore/Superstores would be my advice ,

A bit ironic that you say this because that was the exact mantra Jack Cohen, founder of Tesco used in the beginning.

http://en.wikipedia.org/wiki/Tesco

Jack Cohen's business motto was "pile it high and sell it cheap",[17] to which he added an internal motto of "YCDBSOYA" (You Can't Do Business Sitting On Your Ar*e) which he used to motivate his sales force.

2010

Minrich wrote: »

We bought 150 Frozen turkeys one year , took them back to their store and rebagged them , each one 100% profit - Happy Days

Tesco tried to do the opposite at Christmas 2011.
The pretended they had cut the price of £50 turkeys to £25 but came a little bit unstuck.

http://www.telegraph.co.uk/topics/christmas/8947807/Half-price-Tesco-turkeys-sold-cheaper-by-rivals-without-discount.html

Rival supermarkets have been found to be selling their own frozen turkeys for around the same price, without a 50 per cent discount attached.

Figures show that a Tesco half-price, extra-large frozen turkey has been reduced to £25 from £50, compared to the equivalent bird sold by Asda at a price £1 cheaper.

Tesco insisted that it complied with this rule by selling the turkeys at their full original price during the summer months of August and September – when very few shoppers would want a frozen turkey.

On Friday Tesco said the claimed savings were real.