Private Investor: Why I won't give up on my Tesco shares...for now
Saturday 22 January 2005
"Bonkers!" That was John Humphrys' reaction on the
Today programme on BBC Radio 4 on Tuesday morning when the business correspondent told him that
Tesco shares were down after the supermarket reported excellent results, quite in line with expectations.
"Bonkers!" That was John Humphrys' reaction on the Today programme on BBC Radio 4 on Tuesday morning when the business correspondent told him that Tesco shares were down after the supermarket reported excellent results, quite in line with expectations. Had Mr Humphrys been watching the financial affairs of four leading retailers over the past week or two rather more closely than I suspect he has, he might have added that it was strange indeed that when Sainsburys and Marks & Spencer reported their usual dismal sales news, their shares were marked up.
Bonkers it may be, of course, but it is relatively easy to comprehend. It's all about expectations. Business, like politics, increasingly depends on the massaging of these expectations. Those who have been buying into Tesco in the recent strong run were anticipating good results, and when they got what they wanted, they took profits, the shares were sold and the price slipped.
Perfectly sensible. When Sainsburys and Marks & Spencer managed to persuade the markets that things may be bad but they really can't get much worse, then they were rewarded instead. Quite understandable, too, I guess. It is all a little dispiriting though, as it seems to confirm all those old chestnuts about the short-termism of the City.
Then again, that is itself a short-term view taken over the last couple of years. Since, in fact, I started piling money into Tesco, the shares have been rerated by investors large and small on the basis of the group's long-term record at home and abroad. I reckon that mine cost about 225p a share, and they're all in the money now, at just over 300p. Under the leadership of Sir Terry Leahy, Tesco has shown a very sure touch. The international expansion in East Asia and Eastern Europe has been well managed, and continues apace in Korea, for example. The strategy of opening more local stores also seems to have come off rather well. Room for expansion in the United Kingdom may well be limited by the watchful eye of the Government, as Tesco's market share relentlessly rises, although all the official inquiries into the supermarket's power in recent times have concluded that there is really nothing to worry about.
The other regulatory risk is the planning system, apparently geared to frustrate giant developments on out-of-town sites. Yet this may work to Tesco's advantage, as none of its rivals will be able to catch up with it in this field because they, too, are going to have their planning applications turned down. Stopping Asda and Morrisons from building brand new hyperstores, in other words, may serve only to institutionalise Tesco's pre-eminence in the marketplace.
The real question now, of course, is when the existing management team will drop the ball. Sooner or later, in the life cycle of companies, there comes a period of complacency, and so there will for Tesco. One or two tactical errors - an overstocking here perhaps, an imprudent expansion into an unknown market there - and soon the whole edifice comes tumbling down, just as it did in the case of Marks & Spencer.
The historical analogy is a strong one, as I know to my cost. I recently sold most of my Marks & Spencer shares after a long period of frustration, punctuated only by the excitement of Philip Green's manoeuvres to buy the firm. That really isn't the sort of shareholder reward that we deserve. So I put the money into the racy but hotly tipped SportingBet, which I regard as much the less risky enterprise. But sell my Tesco shares? I would really like a few more pennies on the share price, a little nearer to 350p, before I go for it. After all, every little helps.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Scottish independence: Ireland since 1919 is a lesson for Scotland in what a Yes vote means
- 2 Thailand deaths: Pair's bloodied bodies found naked on Koh Tao beach
- 3 Lego breaks out of the toy box and heads for the gallery
- 4 Vogue under fire for 'Big Booty' article
- 5 Julian Assange and Edward Snowden join piracy mogul Kim Dotcom’s political campaign in New Zealand
Daniele Watts: Django Unchained actress detained by Los Angeles police after being mistaken for a prostitute
The political class is doing what Hitler couldn’t – destroying Britain
Scottish independence: Nationalist leader Jim Sillars threatens pro-union companies with 'day of reckoning' after independence
Scottish independence: Yes campaign feels the heat as Alex Salmond's NHS claims come under furious attack
£23m Birmingham cycle scheme is attacked by Tory councillor for not catering to the elderly
Salmond accused of laughing off national debt with ‘what are they going to do: invade?’ joke
iJobs Money & Business
£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
£35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony