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Warren Buffett Increases Tesco Stake by 13%

Warren Buffett increased Berkshire Hathaway’s stake in UK-based retailer Tesco, Plc (TSCO) to 3.64%, from 3.21%, in the wake of news that Tesco is expected to report a steep decline in sales tomorrow, reported Bloomberg Tuesday.

Warren Buffett

Warren Buffett isn’t the only fund manager confident that Tesco will turn things around. Expectations are strong. “There are a lot of good things going on at Tesco and I suspect that’s what Buffett has observed,” said Phil Doel, F&C Asset Management. Tesco stock has risen by 6.1 percent since September 22, 2011 when it announced a price cutting campaign. Doel explains its strategy: “They don’t need to be the absolute cheapest on everything, but the offering needs to be seen to be good value, so this move is sensible.” Doel’s firm owns 0.8 percent of Tesco.

Approximately 73 percent of the analysts monitored by Bloomberg are recommending a “buy” on Tesco stock. Its consensus analyst recommendation is 4.27, on a scale of 1 to 5, 5 indicating a strong buy and pushing Tesco above its nearest competitors, J. Sainsbury Plc (SBRY) and William Morrison Supermarkets Plc; they ranked 2.74 and 3.74 on the “buy” scale respectively.

The only question is are they right? And, more specifically, is Warren Buffett?

Warren Buffett has more than made his mark in the finance industry – even the mainstream media pays attention to his stock moves – but his performance is not necessarily what it used to be. For instance, he has been losing alpha consistently. But, maybe there is something more to the “Oracle of Omaha”. After all, he still has a talent to spot big name stocks, like when he bet big on American Express (AXP) and made more than $900 million in the second quarter (read the whole story here). Granted, he misses the mark more now – he even underperformed the market in 2010 (see more here) – but when he “wins” he tends to win big. Besides, Warren Buffett cannot really be judged fairly based solely through Berkshire Hathaway’s performance (see why here).

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