The market is wrong on Tesco - but right on ABF

Just as political opinion polls can be misleading, so can the polls run each day in the world's financial districts - those listing the rise and fall of a company's shares.

On the day when Tesco published a set of robust annual results, confirmed it was now growing ahead of its local rivals and shone the spotlight on burgeoning businesses in Asia, it was a surprise to see its shares fall the furthest on the FTSE.

Tesco has beaten off competition from discounters Aldi and Lidl in the UK and is outpacing its nearest rival Asda, which, as it admitted last week, needs to revitalise its own business.

Nonetheless, some analysts were sniffy about Tesco's performance in its core UK grocery operations, arguing that the company had yet to find any "momentum" from that part of its business.

Internationally, too, some may have issues with Tesco. The retailer's Fresh & Easy business in the US is still loss-making and Ireland, a market where the recession has had a particularly acute impact, has been a problem for Tesco in recent months.

However, Tesco insists that its US losses are "flattening out" and that it has seen its own sales in Ireland recover, even while the wider economy remains in the doldrums. In any case, it was further afield that Tesco boss Terry Leahy sought to demonstrate Tesco's growth overseas, particularly when describing the company's Homeplus business in South Korea as a "major engine of growth for the group".

While some of Tesco local rivals may be distracted by changes at the top, investors should be looking at the company's future - and its future share price - with confidence.

Last Tuesday (20 April), meanwhile, saw one of the UK's listed food makers top the share charts, with Associated British Foods' stock rising the fastest on the FTSE. While the headline writers focused on Primark, ABF's discount retail arm, the company's half-year results indicated the creation of an ever-stronger grocery business.

The portfolio has been in the shadow of Primark in recent months but, with restructuring initiatives at Jordans Ryvita, with the creation of ACH as a pure FMCG business in the US and with new bakery products in Australia, ABF's grocery basket looks healthier than it has done for some time.

ABF chief executive George Weston reserved praise for the company's bread business Allied Bakeries. ABF's origins are in bread but, just a few years ago, questions were being asked about the company's future in baking. Now, after the relaunch of Kingsmill, ABF is battling it out in a static but fiercely competitive UK bread market, alongside Premier Foods plc's Hovis and family-owned Warburtons.

Of course, ABF's grocery business is more than just UK bread, encompassing ethnic cuisine, tea and cereals products in the UK, edible oil in the US and bakery in Australia and, from that eclectic mix, analysts are forecasting rising profits over the next 18-24 months.

And, in the wake of ABF publishing its latest numbers, the market seemed to agree, sending the company's shares up by almost 6% - a sign that the market and wider business sentiment on a company can indeed coincide.