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The Tesco Recovery Play - and Why It Might Just Come Off

By Malcolm Stacey | Monday 13 February 2017

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Grinders. As I write this, I’m aware that wise Shareprophets commentator Wildrides will be sharpening his pencil to disagree. And I am not at all sure about supermarkets myself - though I still have shares in the big three home-grown ones. Looking at Morrison (MRW), Sainsbury (SBRY) and Tesco (TSCO), I think the last named is the most likely to bring us the most money from our owning the shares.

The stock has been doing quite well. In the last 12 months the share price is up by about a fifth. While the vast majority of fellow Footsie shares have only improved by an average of about 7% - even though the big index has been tickling all-time highs of late.

Of course, Tesco started from a low base after issues of accountancy and vicious competition from foreign supermarkets - like Aldi and Lidl. After those set-backs, it seems that Tesco may soon be getting back its old levels of revenue.

The shares had a welcome jump recently when the company announced its intention to take over Bookers, Blighty’s biggest food wholesaler. This still requires monopoly and shareholder approval and we will have to see if that link is going to work well or not.

It should do, because Booker has a high-hitting big cheese, Charles Wilson, and he is staying on the board.

Meanwhile, the store has said that it will re-instate a dividend for 2017-18, after registering four continuous quarters of growth. This is sooner than many analysts had hoped for.

However, there are two factors which we should bear in mind. The low pound will make our food - more than half of which comes from abroad - more expensive and Tesco’s price war competitors will always be a nuisance.

Now it's time for a spot more food - in the Punter’s Return.

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