Friday, 3 October 2014

Tesco: Buffett vs Woodford (2)

I posted before about Tesco, with Warren Buffett increasing his stake in the UK supermarket chain, and Woodford selling all his shares.

I wrote:

"Below is the share price of the last 5 years, the stock hasn't done much and might thus be relatively cheap, it pays a decent dividend. Also, it is not often that one can buy a share at a decent discount to the price that Warren Buffett paid. But Woodford's selling does look like a red flag, Woodford is playing a home game in the UK, Buffett is playing away. I prefer to wait, there is anyhow not much good economic news lately, markets look jittery."

The question who was right, Buffett or Woodford, seems to have been answered in a very clear way:

"Warren Buffett: ‘Tesco was a huge mistake’", from an article in The Guardian. Some snippets:

Renowned US investor Warren Buffett has said he made a “huge mistake” by investing in Tesco, as the problems mount at Britain’s largest retailer.

Tesco shares have slumped 45% this year as the supermarket issued four shock profit warnings and last week became embroiled in an accounting scandal, admitting it had overstated its profits by £250m. The retailer has been the worst performer in the FTSE 100 index this year and its shares are at an 11-year low.

Undaunted by a shock profit warning from the company, Buffett raised his stake to over 5% when others were selling the stock. Tesco was the only stock in his top 15 picks that recorded a loss last year. Buffett told CNBC: “I made a mistake on Tesco. That was a huge mistake by me.”

The UK’s financial regulator has launched a full-scale investigation into the  accounting scandal that has plunged Tesco even deeper into crisis. The retailer’s new boss, Dave Lewis, is tasked with restoring Tesco’s battered reputation as well as fixing its business amid rapidly declining sales.

Meanwhile, star UK fund manager Neil Woodford – who decided to sell his stake in Tesco in 2012 after its first profit warning – said last week it could be a long time before any of the British supermarkets became good investment prospects again.

It takes a good investor to admit his mistake, and Buffett (despite the Tesco investment) must indeed be deemed to be one of the best (if not the best) investors of all times.

1 comment:

  1. Everyone makes mistakes. George Soros, another great investor, stated that if one makes 70% investment right decisions, this person can be considered a great investor.

    Mr Buffett has made few bad investment decisions. A great human being too.