Buffett puts Tesco shares in his trolley

The legendary American investor Warren Buffett has placed a $329m (£174m) bet on Tesco shares, in a sign that he sees significant future value in the UK's largest supermarket chain.

The stake, which was acquired in March, accounts for less than 1 per cent of Tesco's shares, but will be seized upon by fans of the company who say that it has been persistently undervalued by the UK stock market.

Mr Buffett bought 57.6 million Tesco shares through Geico, an insurance subsidiary of his Berkshire Hathaway conglomerate, it was revealed in a regulatory filing yesterday.

The investment was made before Tesco said it would unlock up to £5bn from the value of its £24bn-plus property estate over the next five years and return cash to shareholders.

Tesco announced that plan alongside its annual results last month, when the company reported a pre-tax profit of £2.25bn, up 17 per cent on the previous year. Sales had grown 13 per cent to £41.8bn thanks to its push into non-food retailing and into new territories overseas. The company showed the muscle it has when negotiating with suppliers, holding its operating margin flat despite cutting prices in stores by 2 per cent and absorbing £100m of extra costs, an increase of 60 per cent.

Such progress has counted for little with UK investors, who have become nervous that Tesco will squander the profits it makes at home with ill-starred ventures overseas. Last year, £9.2bn of the group's £41.8bn sales came from outside the UK. And earlier this year, the company revealed it had plans to crack the US market, starting with the opening of convenience stores in California.

Tesco shares have missed out on the stock market recovery, staying flat over the past 18 months. The stock has lost 6 per cent of its value since Mr Buffett bought in, after Tesco's sales growth fell to its lowest rate for four years and rival Sainsbury's began to claw back market share in the UK.

A new analysis yesterday by the retail sector analysts at Panmure Gordon suggested that investors are now putting a higher value on Sainsbury's future profits than on Tesco's, even though Sainsbury's is yet to prove it can fully recover from its recent poor performance.

An investment by Mr Buffett - nicknamed the Sage of Omaha - will therefore be seen as an important badge of honour for the company. He is famed for his homespun investment philosophy, shunning technology stocks and stakes in sectors which he does not understand.

His preference is for household name brands with long histories and solid performance records, and he has built up a portfolio which includes McDonald's, Coca-Cola, American Express and Procter & Gamble, the consumer products giant which makes Gillette razors and Pampers nappies. Intriguingly, Berkshire Hathaway also holds a stake worth almost $1bn in Wal-Mart, the owner of Asda in the UK.

PROMOTED VIDEO
Arts and Entertainment
AKB48 perform during one of their daily concerts at Tokyo’s Akihabara theatre
musicJapan's AKB48 are one of the world’s most-successful pop acts
News
Ian Thorpe has thanked his supporters after the athlete said in an interview that he is gay
people
News
The headstone of jazz great Miles Davis at Woodlawn Cemetery in New York
news
Arts and Entertainment
Brendan O'Carroll has brought out his female alter-ego Agnes Brown for Mrs Brown's Boys D'Movie
filmComedy holds its place at top of the UK box office
News
newsBear sweltering in zoo that reaches temperatures of 40 degrees
Arts and Entertainment
Professor Kathy Willis will showcase plants from the Royal Botanic Gardens at Kew
radioPlants: From Roots to Riches has been two years in the making
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
TV The follow-up documentary that has got locals worried
Arts and Entertainment
Eminem's daughter Hailie has graduated from high school
music
Arts and Entertainment
Original Netflix series such as Orange Is The New Black are to benefit from a 'substantial' increase in investment
TVHoax announcement had caused outrage
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

News
One Direction star Harry Styles who says he has no plans to follow his pal Cara Delevingne down the catwalk.
peopleManagement confirms rumours singer is going it alone are false
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

Super Mario crushes the Messi dream as Germany win the 2014 World Cup in Brazil

Super Mario crushes the Messi dream

Germany win the 2014 World Cup in Brazil
Saharan remains may be evidence of the first race war, 13,000 years ago

The first race war, 13,000 years ago?

Saharan remains may be evidence of oldest large-scale armed conflict
Scientists find early warning system for Alzheimer’s

Scientists find early warning system for Alzheimer’s

Researchers hope eye tests can spot ‘biomarkers’ of the disease
Sex, controversy and schoolgirl schtick

Meet Japan's AKB48

Pop, sex and schoolgirl schtick make for controversial success
Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

How Saudi Arabia helped Isis take over northern Iraq

A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

The evolution of Andy Serkis

First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

You thought 'Benefits Street' was controversial...

Follow-up documentary 'Immigrant Street' has got locals worried
Refugee children from Central America let down by Washington's high ideals

Refugee children let down by Washington's high ideals

Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
Children's books are too white, says Laureate

Children's books are too white, says Laureate

Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Blackest is the new black: Scientists have developed a material so dark that you can't see it...

Blackest is the new black

Scientists have developed a material so dark that you can't see it...
Matthew Barzun: America's diplomatic dude

Matthew Barzun: America's diplomatic dude

The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

Meet the 'Quantified Selfers'

From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

Five-star reviews are just the opening act for British theatre's first non-white artistic director

Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
Mrs Brown and her boys: are they having a laugh?

Mrs Brown and her boys: are they having a laugh?

When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor