Followers of this blog may have been forgiven for thinking it was dead.
Not so fast.
I’ve been rather busy and I’ll let you all know the reasons why in the coming days but before all that I’d thought it would be good to reintroduce myself with a revisit to the ailing supermarket giant Tesco (TSCO).
A reader had asked me all the way back in the summer of 2014 what my thoughts were on Tesco which at the time was trading at 250p.
Here’s what I wrote:
…in today’s market with today’s consumer habits even with it’s brand name, purchasing power, distribution channels and the like Tesco is worth 300p
My valuation has not changed even though at today’s share price of 240p Tesco still has not recovered it’s ground and frankly I do not see it doing so for a long time to come.
Prices for Tesco on 19 February 2015
But interestingly Kantar Worldpanel announced earlier in the quarter that Tesco had actually managed to scrape an increase in sales for the first time in 12 months but crucially it is still losing market share at the same time that Aldi and Lidl increased market share.
Let’s not forget the accounting scandal.
At an intrinsic valuation of 300p, today’s share price of 240p is just too expensive for Tesco stock but not so for readers who saw me post this caption and chart in June 2014:
At today’s (4 June 2014) share price of 296p, Tesco’s PE Ratio is 24.
That makes Tesco stock too expensive to make an investment in.
It’s share price really needs to decline a lot further before it becomes a true bargain.
How much further?
Well all else being equal it’s 2003 lows of 162p a share would be nice.
Readers only needed to wait six months later to mid December 2014 to make an investment at 162p which means at todays price of 240p would have been a nice 48% gain in two months.
Disclosure: at the time of writing I do not own shares in Tesco nor do I plan on taking a position in Tesco over the next 72 hours.