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Tesco May Be Heavily Traded - But I Rather Wish I'd Not Bothered Myself

By Malcolm Stacey | Thursday 4 May 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 Grapplers. It seems that two of the most popular shares being bought and sold by we great band of punters at the mo are Lloyds Group (LLOY) and Tesco (TSCO). I looked at Lloyds yesterday, reckoning it has the making of a good buy because of slow, if unspectacular, progress revealed in its last quarterly figures. I’ll turn to another well-traded share, Tesco, today.

I’m not so happy about my holding in this lot. I’ve wondered aloud before why I keep such a relatively large holding of Tesco stock, but the share bottomed out before I got my selling act together and since then the price has improved. As long as it keeps improving, I will stay on board.

However, that does not stop me airing a few doubts. Firstly it is acquiring Booker, the big wholesaler. Will that boost earnings? Some analysts don’t seem too sure.

There’s been some comment lately that Tesco’s share of the market is dipping. This cannot surprise anyone who regularly shops with its foreign rivals, Aldi and Lidl. I still find that my Aldi bill is less scary than Tesco’s. But I use Tesco because its delivery people are marvellous and I can’t always be bothered to trot round Aldi and Lidl shelves. But I still don’t think the British giants’ prices are competitive enough.

Profit margins were up in 2016/17, but not enough to rocket the share price. Even less ‘alternative’ supermarkets like Asda have been cutting prices even further. And there is nothing that should strike fear into a share shifter’s heart than a price war. Especially the continuing one the UK supermarkets seem to be fighting.

But it's not all bad news. Tesco is waging a successful battle to reduce debt and says it will restore a dividend for 2017/18. It may not set your heart racing, though. My prediction, for what it’s worth, is 2%. Which is not enough to make me sell any of my Lloyds stock to buy more Tesco.

And now let’s join the throng in the Punter’s Return.

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