GREAT IDEAS
12 | SHARES | 23 May 2019
The UK supermarket is dominant, defensive and dividend paying to bootTesco could make you good
money as an investment
T
he market is warming to
supermarket group Te s c o
(TSCO) as it is showing
ƚŚĞƌŝŐŚƚƋƵĂůŝƟĞƐƚŽĐŽƉĞǁŝƚŚ
ĐŽŵƉĞƟƟŽŶĨƌŽŵĚŝƐĐŽƵŶƚĞƌƐ
ůĚŝĂŶĚ>ŝĚů͘tĞƚŚŝŶŬŶŽǁŝƐƚŚĞ
ƉĞƌĨĞĐƚƟŵĞƚŽŐĞƚŽŶďŽĂƌĚĂƐ
the shares are not expensive on
ϭκ͘ϭƟŵĞƐƉƌŽƐƉĞĐƟǀĞĞĂƌŶŝŶŐƐ
ĂŶĚĂϯ͘ϭйƉƌŽƐƉĞĐƟǀĞĚŝǀŝĚĞŶĚ
ŝƐƚŚĞĐŚĞƌƌLJŽŶƚŽƉ͘
/ƚƌĞŵĂŝŶƐƚŚĞĚŽŵŝŶĂŶƚ
ĨŽƌĐĞŝŶh<ŐƌŽĐĞƌŝĞƐĂŶĚ͕ŐŝǀĞŶ
ƉƌĞƐĞŶƚĞĐŽŶŽŵŝĐƵŶĐĞƌƚĂŝŶƟĞƐ͕
ǁĞƚŚŝŶŬƚŚĞĚĞĨĞŶƐŝǀĞĞůĞŵĞŶƚ
ƚŽĨŽŽĚƌĞƚĂŝůŝŶŐŝƐĂŚƵŐĞ
ƉŽƐŝƟǀĞĂŶĚƐŚŽƵůĚƵŶĚĞƌƉŝŶƚŚĞ
ƐŚĂƌĞƉƌŝĐĞƐŚŽƵůĚŵĂƌŬĞƚƐďĞ
ƌŽĐŬĞĚĂŐĂŝŶŐŽŝŶŐĨŽƌǁĂƌĚ͘
&ŽƌĞĐĂƐƚͲďĞĂƟŶŐĨƵůůLJĞĂƌ
ƌĞƐƵůƚƐ;ϭϬƉƌͿƌĞǀĞĂůĞĚŐƌŽƵƉ
ƐĂůĞƐƵƉϭϭ͘ϯйǁŝƚŚĂƐƚĨƌŽŵ
ǁŚŽůĞƐĂůĞŽƉĞƌĂƟŽŶŽŽŬĞƌĂŶĚ
ůŝŬĞͲĨŽƌͲůŝŬĞƐĂůĞƐƵƉϮ͘εйŝŶƚŚĞ
ĐŽƌĞh<ĂŶĚZĞƉƵďůŝĐŽĨ/ƌĞůĂŶĚ
ďƵƐŝŶĞƐƐ͕ƌĞƉƌĞƐĞŶƟŶŐĂƚŚŝƌĚĨƵůů
LJĞĂƌŽĨŐƌŽǁƚŚ͘
KƉĞƌĂƟŶŐƉƌŽĮƚŐƌĞǁĂŶ
ŝŵƉƌĞƐƐŝǀĞϯϯ͘ρйƚŽάϮ͘ϮϭďŶ
ĂŶĚ͕ƌĞŇĞĐƟŶŐĐŽŶĮĚĞŶĐĞŝŶ
ŝƚƐĐŽŶƟŶƵŝŶŐĐĂƐŚŐĞŶĞƌĂƟŽŶ͕
dĞƐĐŽŶĞĂƌůLJĚŽƵďůĞĚƚŚĞĨƵůů
LJĞĂƌĚŝǀŝĚĞŶĚƚŽρ͘ϳϳƉ͘
&ŽůůŽǁŝŶŐĂĨƌƵŝƞƵůĨŽƵƌLJĞĂƌƐ
ŝŶƚŚĞŚŽƚƐĞĂƚ͕ĐŚŝĞĨĞdžĞĐƵƟǀĞ
ĂǀĞ>ĞǁŝƐƐĂŝĚ͚ǁĞŚĂǀĞŵĞƚ
ŽƌĂƌĞĂďŽƵƚƚŽŵĞĞƚƚŚĞǀĂƐƚ
ŵĂũŽƌŝƚLJŽĨŽƵƌƚƵƌŶĂƌŽƵŶĚ
ŐŽĂůƐ͛͘^ŝŐŶŝĮĐĂŶƚůLJ͕ƚŚĞƐĞĐŽŶĚ
ŚĂůĨŽƉĞƌĂƟŶŐŵĂƌŐŝŶĂĐŚŝĞǀĞĚ
ƐĂƚǁĞůůǁŝƚŚŝŶdĞƐĐŽ͛Ɛϯ͘ρйͲƚŽͲ
κйƚĂƌŐĞƚĞĚƌĂŶŐĞ͘ƚŶĞdžƚŵŽŶƚŚ͛ƐĐĂƉŝƚĂů
ŵĂƌŬĞƚƐĚĂLJ;ϭΘ:ƵŶĞͿ͕dĞƐĐŽ
ǁŝůůƐŚĂƌĞƐŽŵĞŽĨŝƚƐ͚ƵŶƚĂƉƉĞĚ
ǀĂůƵĞŽƉƉŽƌƚƵŶŝƟĞƐ͛ǁŝƚŚ
ŝŶǀĞƐƚŽƌƐĂƐŝƚŵŽǀĞƐďĞLJŽŶĚ
ƚŚĞƚƵƌŶĂƌŽƵŶĚƉŚĂƐĞ͘dŚŝƐ
ŝŶǀĞƐƚŽƌĞǀĞŶƚĐŽƵůĚƉƌŽǀĞĂ
ĐĂƚĂůLJƐƚĨŽƌƐŽŵĞďƵůůŝƐŚĂŶĂůLJƐƚ
ĐŽŵŵĞŶƚĂƌLJ͕ŚŽƉĞĨƵůůLJŶƵĚŐŝŶŐ
ƚŚĞƐŚĂƌĞƐŚŝŐŚĞƌƐƟůů͘
KīĞƌŝŶŐĞdžƉŽƐƵƌĞƚŽƚŚĞ
ŐƌŽǁŝŶŐĐŽŶǀĞŶŝĞŶĐĞĂŶĚŽŶůŝŶĞ
ĐŚĂŶŶĞůƐ͕dĞƐĐŽ͛ƐĐŽŵƉĞƟƟǀĞ
ƉŽƐŝƟŽŶŚĂƐďĞĞŶƐƚƌĞŶŐƚŚĞŶĞĚ
ďLJƚŚĞŽŵƉĞƟƟŽŶĂŶĚDĂƌŬĞƚƐ
ƵƚŚŽƌŝƚLJ͛ƐĚĞĐŝƐŝŽŶƚŽďůŽĐŬ
ƚŚĞŵĞŐĂͲŵĞƌŐĞƌďĞƚǁĞĞŶ
Sainsbury’s (SBRY) ĂŶĚ ƐĚĂ͕Ă
ĚĞĂůƚŚĂƚǁŽƵůĚŚĂǀĞƐĞĞŶƚŚĞ
ĐŽŵďŝŶĞĚĞŶƟƚLJůĞĂƉĨƌŽŐdĞƐĐŽ
ŝŶŵĂƌŬĞƚƐŚĂƌĞƚĞƌŵƐ͘
&ŽƌŶŽǁ͕dĞƐĐŽ͛ƐƉŽƐŝƟŽŶĂƐƚŚĞh<͛ƐďŝŐŐĞƐƚŐƌŽĐĞƌƌĞŵĂŝŶƐ
ƐĞĐƵƌĞ͘dŚĞƌĞƚĂŝůĞƌĐŽŵŵĂŶĚƐ
ĂϮϳ͘ϯйƐŚĂƌĞĂĐĐŽƌĚŝŶŐƚŽƚŚĞ
ůĂƚĞƐƚ<ĂŶƚĂƌĚĂƚĂ͕ĂŚĞĂĚŽĨ
^ĂŝŶƐďƵƌLJ͛ƐǁŝƚŚϭρ͘κй͕ƐĚĂ
ŽŶϭρ͘ϮйĂŶĚMorrison (MRW)
ǁŝƚŚĂϭϬ͘ϯйƐůŝĐĞŽĨƚŚĞƉŝĞ͘
'ŝǀĞŶĐƵƚͲƚŚƌŽĂƚĐŽŵƉĞƟƟŽŶ
ĂŶĚĂůŽŽŵŝŶŐƚŚƌĞĂƚĨƌŽŵ
ŵĂnjŽŶ͕dĞƐĐŽŶĞĞĚƐƚŽƐƚĂLJ
ǀŝŐŝůĂŶƚ͘/ƚŝƐĂůƐŽĐƵƫŶŐƚŚĞ
ŶƵŵďĞƌŽĨƉƌŽĚƵĐƚƐŝƚƐĞůůƐĂƐŝƚ
ĮŐŚƚƐďĂĐŬĂŐĂŝŶƐƚƚŚĞƌĂƉŝĚůLJ
ŐƌŽǁŝŶŐĚŝƐĐŽƵŶƚĚƵŽŽĨůĚŝĂŶĚ
>ŝĚů͕ǁŚŝĐŚƐƉĞĂŬĨŽƌĂĐŽŵďŝŶĞĚ
ϭϯ͘ςйŽĨƚŚĞŵĂƌŬĞƚ͘
/ŶĂĨƵƌƚŚĞƌĮŶĞƚƵŶŝŶŐŽĨ
ŝƚƐĂĐƟǀŝƟĞƐ͕dĞƐĐŽĂŶŬŚĂƐ
ĂŶŶŽƵŶĐĞĚ;ϮϭDĂLJͿŝƚŚĂƐ
ĐĞĂƐĞĚŶĞǁŵŽƌƚŐĂŐĞůĞŶĚŝŶŐ
ĂŶĚŝƐ͚ĂĐƟǀĞůLJĞdžƉůŽƌŝŶŐŽƉƟŽŶƐ͛
ƚŽƐĞůůƚŚĞĞdžŝƐƟŶŐŵŽƌƚŐĂŐĞ
ƉŽƌƞŽůŝŽ͘
dŚŝƐĚĞĐŝƐŝŽŶĚĞŵŽŶƐƚƌĂƚĞƐ
ǁĞůĐŽŵĞĐĂƉŝƚĂůĚŝƐĐŝƉůŝŶĞĨƌŽŵ
dĞƐĐŽ͖ŝĨĂďƵƐŝŶĞƐƐůŝŶĞŝƐŶ͛ƚ
ƉƌŽĮƚĂďůĞ͕>ĞǁŝƐǁŽŶ͛ƚƐƋƵĂŶĚĞƌ
ĨƵƌƚŚĞƌĨƵŶĚƐŝŶŝƚƐƉƵƌƐƵŝƚ͘dŚĂƚ
ĂƉƉƌŽĂĐŚƐŚŽƵůĚďĞĂƉƉůĂƵĚĞĚ͘TESCOÈ BUY
(TSCO) 236.9p
Stop loss: 189.5pMarket value: £23.2bn190210230250(^270) TESCO
2018 2019
LJJames Crux
&ƵŶĚƐĂŶĚ/ŶǀĞƐƚŵĞŶƚ
dƌƵƐƚƐ ĚŝƚŽƌ