Blog: Dean BestTesco gets boost from Buffett

Dean Best | 21 November 2011

Warren Buffett, held up as one of the world's most successful investors, has indicated an interest in boosting his stake in UK retail giant Tesco.

The US billionaire, dubbed the Sage of Omaha, already owns around 3.6% of Tesco but he told CNBC that he would be interested in increasing his interest.

"If the price came down some on Tesco, I'd buy some more of that," Buffett said.

Tesco accounts for around a third of the UK grocery market but is facing fierce competition from the likes of Asda, owned by Wal-Mart, Sainsbury's and Morrisons. Last month, Tesco reported a drop in UK like-for-like sales, excluding fuel and VAT, in the six months to 27 August.

However, Tesco, the world's third-largest retailer, has operations in 12 markets outside the UK (excluding Japan, which it is set to leave) and has built businesses in emerging markets, including Thailand and Turkey. The company's emerging market exposure fares favourably to some of its peers and could provide a benefit to longer-term investors.

Nevertheless, Buffett seemed not to be swayed by Tesco's operations in emerging markets. In Buffett's interview with CNBC, which centred on his views on investing in Europe, he said his reasons for investing in companies on the continent were the same as in the US. "I don't worry about whether they have emerging market exposure. I've used the same criteria for 60 years," he said.

That said, Buffett sees value in Europe, where share prices have been hit by the eurozone crisis. "Obviously the prices in Europe make a lot more sense than a year ago," he added.

Buffett's endorsement is likely to have pleased Tesco, although his interview with CNBC did not include his views on the retailer's operations in the US. Earlier this year, Buffett described Tesco's four-year venture in the US, where the company has yet to make a profit, as "foolhardy".


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