Tesco Tag

Bad News at Tesco Could Be Good News for Investors

in Analysis

Sir John Templeton, father of international investing, coined the term "points of maximum pessimism" — you want to buy when the news flow is horrible, because the bad news is likely to be more than priced into the stock. This is where I feel Tesco is today, and this is why my firm recently added to our position in the U.K.-based retailer.Although Tesco’s business is doing worse today than it was even six months ago, things are not as bad as you’d infer from the stock price or from reading the financial press. Almost every single piece of news coming from Tesco over the past few months could be put in one of two buckets: bad or horrible. Its same-store sales were down a few percentage points; it reduced its earnings guidance for 2014, fired its CEO and decreased its dividend. And to put a cherry on this sagging cake, Tesco found a £250 million ($400 million) accounting error in its earnings forecast. The cumulative effect of this news has sent the company’s shares to an 11-year low. Tesco went from being one of the most successful and respected retailers in the world — its previous CEO was knighted —...