Reasons To Buy, Hold And Sell Tesco Plc

Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) is one of the largest companies in the world, and a popular FTSE 100 share.

Many private investors have differing opinions on the grocer and its prospects from here.

So here’s a quick rundown of the key reasons why you may wish to buy, sell or simply hold on to the company’s stock.

Buy

Investors buying shares in Tesco today aren’t likely buying it for the UK growth story.

It’s more likely that investors are hoping Tesco can continue to expand its presence in emerging markets such as Eastern Europe and Asia.

Another reason you could be bullish on Tesco today is if you believe in a consumer recovery. The UK and European consumer has no doubt been hurt by troubles in the eurozone, but there’s reason to believe when spending picks up Tesco will benefit.

And finally, Tesco is trading cheaply compared to historical valuation averages based on profits and dividends.

Hold

If you own Tesco shares, there are a few reasons to sit tight.

First up is boss Philip Clarke. He’s got a big job in front of him as he stages a turnaround and tries to secure Tesco’s spot as a leading multi-channel retailer.

That takes time. So does a consumer recovery.

So if you’re willing to give Clarke some time, you can take solace in the dividend — Tesco’s 4.1% yield offers some good income while you wait.

Sell

Investors shouldn’t be fooled: Tesco faces intense competition from other grocers such as J Sainsbury, Wm. Morrison Sipermarkets and Asda (owned by Wal-Mart).  

Tesco also has to keep an eye on a little company called Amazon.com. The online retailer could put Tesco’s profits under increased pressure as the move to online retail could render the supermarket’s dominant bricks-and-mortar store presence meaningless.

And finally, investors can’t forget Tesco’s failed attempts at international expansion in the US (Fresh & Easy) and Japan. This doesn’t inspire confidence that the company can turn things around in its other markets, and could give investors reason to sell.

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> Both Jill and The Motley Fool own shares in Tesco.