Tuesday, June 12

Time to Buy Stocks in Tesco?

Is It Time to Buy Tesco?

Following its recent problems (people say they don't like their shops or their staff and they find their prices at times misleading apparently - and there are cheaper places to shop)Tesco's share price has slumped from 440p to 300p - quite a drop for a big company like Tesco. Does this mean it is now cheap and a good stock to buy at these prices?

Tesco store
A Tesco Store
If you are a long-term buy and hold investor then an extra 10% one way or the other won't make much difference to you. Warren Buffett after all bought multiple shedloads at 320p so he is down around 7%, but will be picking up shedloads of dividends which he will no doubt take in the form of shares, thus adding to his holding and benefitting from the positive effects of compound interest (interest on the interest - the negative effects of which can be seen in the form of credit cards, where you pay interest on the interest on the interest etc... - which is why Warren Buffett doesn't use credit cards but he does offer them to customers of the banks he part owns - he's such a sensible old fellow).

So if you are long-term investor who holds shares forever then 300p might be a decent price to be buying Tesco at. But IMHO there may well be an opportunity to buy them even cheaper.

The reaction to their recent results (yesterday) has generally been negative and the charts IMHO are still pointing down - so I will not be buying Tesco any time soon, - 260p seems to me to be to be a much better price to be taking a risk at. That's not to say the price won't bounce around, maybe even enough to turn a quick profit, but the risk reward ratio to me still seems a bit too high.

Tesco 20 Year Chart - the share price is still way below the 200 day moving average

Tesco 6 month chart - trend still looks negative to me - maybe if/when the 20 day m.a. crosses over the 50 day m.a. on the way back up it will look more positive

If  you are interested in learning more about charts see - http://www.howtotradestocks.co/2009/05/investing-online-stock-market-charts.html