Greetings all - a little advice??

[Syntaxis]

Hi guys and gals,

My name is Luke and I'm new to the world of trading. Just to give you a bit more background information about me - I'm 22 and I start university later this year studying International Business and Economics at Aston University (England). :smart:

I became interested in trading while doing an assignment earlier this year. I had to decide whether Tesco PLC was a good investment over a ten year period. After my research I became so convinced that it was, that I decided to spend £1000 of my own money and bought 316 shares in the company at 3.10728p each.

Now, I don't actually intend to hold onto these shares for ten years. I've heard the rhetoric about keeping your winners and selling your losers, but I feel a nice twenty to thirty per cent gain would be more useful to me right now.

So my question is, do you guys think I've made a good bet? Certainly the price has went down a bit since I first bought them, and I could have got them cheaper if I had waited longer. However, it seems to be coming back up slowly. I would like to sell somewhere around 4.00p.

Here is a link to the london stock exchange Tesco page to save you guys some time - TESCO PLC ORD 5P Interactive Chart - London Stock Exchange

Hope to get some interesting responses!

~ Luke

 

[Syntaxis]

*bump*

 

[Jack o'Clubs]

So you did your research based on a 10 year view, but are looking for a quick 20-30pc pop. Why did you do the research? Tesco is a mature consumer staples retailer, operating with significant competition in most of its key markets. Why do you think that the market is going to suddenly think this business is worth 20% more, or create an additional £5bn of value for investors? Where do you think that additional value is going to come from? Or do you think the market will rise 20% and the rising tide will lift all ships (in which case you could have bought anything)? Have a think about these and you'll be able to answer your question yourself in future.

 

[Jane Brown]

Hi there,

Im also new here in forum . but, im doing research about trading and still learning. Reading some books about fx and etc. Looking forward to gain friends here and learn as well. Hope to hear from you soon, guys!

 

[Albert Carey]

So my question is, do you guys think I've made a good bet?

I think not. Your risk is too high.

 

[Syntaxis]

So you did your research based on a 10 year view, but are looking for a quick 20-30pc pop. Why did you do the research? Tesco is a mature consumer staples retailer, operating with significant competition in most of its key markets. Why do you think that the market is going to suddenly think this business is worth 20% more, or create an additional £5bn of value for investors? Where do you think that additional value is going to come from? Or do you think the market will rise 20% and the rising tide will lift all ships (in which case you could have bought anything)? Have a think about these and you'll be able to answer your question yourself in future.

Thanks for your response Jack. The thing is, I had to do the research on a ten year view because that was a part of my assignment. Now as I said, I'm new to investing and I don't claim to know very much, but here are the reasons why I felt/feel my investment in Tesco could be profitable. You can all advise me as to whether these reasons are valid or not.

Back in January 2012 Tesco had a small profits warning whereby like-for-like sales contracted marginally. This caused the share price to fall from 4.11p to 3.12p. The price has fluctuated up and (mostly) down since then. Philip Clarke announced a GBP1bn investment in Tesco to combat declining like-for-like sales. It appears to be working thus far.

Tesco's International sales growth in Asia and other international markets is doing very well, and some analysts believe that Tesco could become the world's second largest retailer overtaking Carrefour. The only market Tesco is really performing badly in is the USA (Fresh and Easy). However, that division of the company is expected to break even by 2013/2014.

I know this might seem a bit naive, but, Warren Buffett.

Plus, Tesco plays a pretty reasonable dividend.If I'm wrong and the price doesn't go up in the next one or two years, I can wait it out.

To me, this represents a darkest hour moment for Tesco, the perfect time to snap up some good shares while they're selling cheap. Remember, Tesco still controls roughly twenty-nine per cent of the UK grocery market share.

 

[barjon]

Rather like M&S a few years ago, Tesco have fallen behind the pace as far as the "shopping experience" is concerned. Many of their stores have become shabby by comparison and a straw poll amongst my wife's friends says that they don't like shopping there at the moment (just like they said about M&S).

Tesco have recognised all this, but it'll probably take a bit of time for them to turn it around. That's not to say price won't go the right way in the meantime, of course - I've got some, but I don't expect fireworks.

Gotta listen to the ladies you know

 

[MCharlesF]

I am also invested in Tescos.

It is a decent company with a firm leading market position in the UK (although it is having a tough time at the moment). Also its overseas prescence has remarkably grown stronger in recent years. This market position is backed up by solid fundamentals. Profit warning recently, sure, but its revenues are still growing.

I think over the next year or so Tescos price will depend on two criterea, the overseas growth (how much can they continue to grow?) and its domestic investment (how much will they improve stores by and what will the new staff recruitment/training contribute to its service?). Currently its nailed the overseas market and had great growth recently, but at the cost of its domestic market. So a role reversal in operations and management (switch from overseas to domestic focus) could see its business abroad, shrink or stagnate. But it all depends on what investors see as more valuable, which at the moment is its domestic presence.

This should be a long-term holding as there is time-lags with the investments etc. 3-5 years would be an ideal holding time, in my opinion.

 

[Syntaxis]

I am also invested in Tescos.

It is a decent company with a firm leading market position in the UK (although it is having a tough time at the moment). Also its overseas prescence has remarkably grown stronger in recent years. This market position is backed up by solid fundamentals. Profit warning recently, sure, but its revenues are still growing.

I think over the next year or so Tescos price will depend on two criterea, the overseas growth (how much can they continue to grow?) and its domestic investment (how much will they improve stores by and what will the new staff recruitment/training contribute to its service?). Currently its nailed the overseas market and had great growth recently, but at the cost of its domestic market. So a role reversal in operations and management (switch from overseas to domestic focus) could see its business abroad, shrink or stagnate. But it all depends on what investors see as more valuable, which at the moment is its domestic presence.

This should be a long-term holding as there is time-lags with the investments etc. 3-5 years would be an ideal holding time, in my opinion.

Thanks for your interesting response MCharles. Although ideally I would like to sell sooner rather than later, I'm not adverse to waiting 3-5 years if necessary. What price are you looking sell at?

 

[MCharlesF]

I personally think holding Tescos shares shorter then that is not an ideal timeframe. This is a classic case of a recovery share, a decent company hitting a rocky patch that needs a few years to re-establish itself in the limelight.

Investing is a long term process, so i'll hold the stock for that time frame but re-evaluate my holding every year. The re-evulation process will either result in buying more shares or selling existing shares to balance myself from becoming overweight or underweight. This is a warren buffet stock, so i'll follow suit and use his strategy for it.

Although if the SP did shoot up to £4.00 within a month or so i would most likely take the cash and run

 

[Alliance01]

Whether this is a good bet is really only for you to decide, Syntax. Wheter you have too much risk here or a muddled logic is not really for anyone to say as each traders view and approach differs. What works for one may not work for another. Find an approach that works for you and roll with it. You may have some hard lessons on the way and whilst these can never be totally avoided the effect can be reduced with discipline and focus - the key is to determine at what point you will have had enough if it starts to go pear shaped; if the price slips and you are £100 or £200 down, what do you do, wait for long(er) term possible recovery or close out and walk away bruised but alive? The latter gives you a chance to revisit your analysis and see if there is another angle, something you might have missed. Personally, I like Tesco but I think they have too many quite fundamental issues to deal with before consistent and sustainable value can be reignited. Not dynamic enough a sector or name for 20-30pc type growth for me. How about looking at the groups that supply them? With rationalisation of suppliers, there will be big winners and losers on that space that will move in shorter order than Tesco will. Just a thought.