How to Buy Tesco Stock in 2021
Tesco is a household name for grocery shopping in various parts of the world, particularly the UK. Despite being classed as essential retailers, supermarkets such as Tesco weren’t immune from the effects of the coronavirus pandemic. And with the rising tide of the post-pandemic recovery set to lift all stocks, Tesco could be a good stock to buy.
This guide is for investors who are thinking about buying Tesco stock. It looks at Tesco's history, business models, and revenue streams, as well as how to buy the stock.
Learn How to Buy Tesco Stock in 3 Easy Steps
Find a Broker
Open an account with an online stockbroker that can give you access to the London Stock Exchange or other stock exchanges where Tesco shares are traded. Choose a broker that charges low commission fees but imposes no minimum account balances.
Analyse the Tesco Stock Price Chart
After using fundamental analysis to determine Tesco’s financial health, you should study its sprice chart to determine the right to buy the stock. You may buy on a dip or breakout, and the time frame to analyse the chart depends on whether you’re day trading, swing trading, or position trading.
Once the time is right, specify your trade size — number of shares, amount of money, or CFD stake size — and hit the broker’s “buy” button for the stock. If you’re trading with leverage, be sure to add a protective stop order to close your trade automatically if it goes against you.
Tesco Company Overview
Tesco started as a group of market stalls in 1919, but the first Tesco shop opened in 1931. The owner, Jack Cohen, came up with the name after he purchased a shipment of tea from T. E. Stockwell. Cohen then combined the three initials with the first two letters of his surname.
The company expanded rapidly, and by 1939, it had over 100 Tesco shops across the United Kingdom. Since the early 1990s, Tesco has expanded globally, with operations in 11 other countries, becoming the first British supermarket to do so.
Since starting as a grocery store, Tesco has diversified into merchandise, book retailing, clothes, electronics, furniture, toys, petrol, software, financial services, telecoms, and internet services.
Tesco is the market leader for groceries in the UK, controlling 27.3% of the market, well ahead of second-placed Sainsbury’s at 15.3%. Tesco is also the ninth-largest retailer in the world by revenues. The company pulled out of the US in 2013 as it could not apply the results of its two-year research on the American market and connect to its target market.
Tesco was listed on the London Stock Exchange in 1947 and is a constituent of the FTSE 100 Index. The company has a market capitalization of approximately $17.53 billion as of June 2021.
Tesco Business Model and Revenue Streams
Tesco describes its business model as buying, moving, and selling products and services to customers, and using customers to get insight on how to do a bit better the next time.
Tesco’s business model is focused on three core areas: customers, products, and channels. The company identifies customers as the pillar of its business model and invests in channels that will improve communication with customers and provide insights into their tastes and preferences.
Through its loyalty card, Tesco harvests data about customers' shopping patterns and uses them to categorize shoppers based on their needs and preferences. By looking at its operations through its customers' eyes, Tesco has been able to change the way it engages its consumers.
Realizing the technological revolution in retail shopping, Tesco has started transitioning into an e-commerce company, in line with Amazon’s model. For example, the company purchased We7, a music streaming company, for a relatively modest amount of £10 million.
In terms of revenue streams, the bulk of cash comes from Tesco’s retail stores. Its price differentiation and market segmentation strategies have endured so much that Tesco maintains a dominant share of the UK market. The adoption of e-commerce opened up lots of opportunities for Tesco during the pandemic, as customers who were isolated indoors had little choice but to place their orders online. Tesco’s first-half profits in 2020 rose by more than 25% and online orders doubled.
Tesco generates most of its revenue from the United Kingdom and Ireland. In the 2020 fiscal year, Tesco generated £45.7m from its UK and Ireland market, while its international market generated only £10.6m.
History of Tesco
At the end of the first world war, Jack Cohen, a former member of the Royal Flying Corps, began his grocery and merchandise business by selling surplus groceries from a stall in London's East End. He used his demobilization funds to buy the first day's stock, making a profit of £1 on sales of £4.
Cohen came up with the name Tesco six years later after purchasing a shipment of tea from T. E. Stockwell. He combined the three initials in T. E. Stockwell with the first two letters of his surname. That same year, Cohen acquired a plot of land at Edmonton, north London, to build a new headquarters and warehouse, making it the first modern food warehouse in the United Kingdom. The ability to store inventory led to greater stock control and reduced prices for customers. In the 1930s, Tesco opened many branches across London and neighboring counties.
In 1946, Tesco launched self-service stores, an idea Cohen got when he visited the United States. And in 1947, Tesco stock was listed on the London Stock Exchange, with a share price of 25 pence. During the 1950s and 1960s, Tesco acquired more shops, getting the number to 800.
Tesco diversified into petrol sales in 1973, opening petrol stations at important sites. In 1979, Jack Cohen passed away, marking the end of an era for Tesco. The 1980s were spent on advertising and marketing campaigns to lure shoppers to Tesco stores through discount sales.
It was not until 1995 that Tesco expanded overseas with stores opening in Hungary. Within a decade, Tesco opened stores in the Czech Republic, Slovakia, Poland, Ireland, Thailand, Malaysia, and India. In 1997, Tesco launched the Tesco Personal Finance, a savings account that got over 300,000 subscriptions on its first day, and in 1998, it launched the Tesco Finest food range that was aimed at more affluent customers.
Tesco went online in 2000 to take advantage of the internet in retailing. In 2001, Tesco launched its fast-fashion brand Florence & Fred (F&F). The company bought the UK's second-largest convenience store chain, One Stop, in 2002. And in 2003, it launched Tesco Mobile.
Tesco has also been associated with several community social responsibility projects. It launched Tesco Food Collection, the UK’s largest food collection, in 2012. The project encourages customers to donate food to charity and vulnerable people in need. In 2015, Tesco launched the Bags of Help scheme, which charged 5p per bag in England, Scotland, and Wales, and the funds from the initiative were used to fund projects to improve green spaces and environmental awareness in local communities. That same year, Tesco partnered with food redistribution charity FareShare to provide surplus food for free to local charities and communities every day. In 2016, the company started the Free Fruits for Kids project to create healthy eating values in kids.
Brokers that Offer Tesco Shares
Many brokers offer Tesco shares. You can choose a full-service broker or opt for a discount broker, depending on your investment goals and objectives. We have compiled a list of the best brokers that offer Tesco shares.
Should I Invest in Tesco Stock?
The Tesco share price fell by more than 10% on February 15, 2021, a day after the ex-dividend date. Since then, the stock has been trading in a range between 220p and 235p, which is about 12.5 times the forward earnings. Considering that it might attempt the February 2021 high again if it breaks the resistance, you may want to add the stock to your investment portfolio.
Tesco Stock Investment Potential
In the five years to 2021, Tesco has outperformed the FTSE 100 index: the stock has gained more than 50% while the FTSE 100 has appreciated by just 12%. Investors see Tesco as a dividend and value stock rather than a growth stock. The company reported a profit of £2.5 bln in the 2021 FY, but this was slightly lower than the £2.6 bln reported in the preceding year.
The company is innovative and has been diversifying into new areas away from its traditional grocery and merchandise ecosystem. However, a significant source of concern is the competition from Amazon, which has already made an entry into the food delivery business by acquiring Deliveroo. Nonetheless, given its foothold in the UK market, plus its diversification and price differentiation strategy, Tesco looks like a stock that would be able to ward off the stiffest of competitions.
What Kinds of Investors Should Include Tesco Stock in their Portfolios?
Tesco appeals more to long-term value investors who seek dividends on their capital rather than share price growth. In December 2020, the company announced that it sold its business in Thailand and Malaysia for £8.2bn. About £5bn of the proceeds were shared to investors through a special dividend and share consolidation. The company also has a knack for identifying changing trends in consumer shopping. All these make Tesco stock attractive for long-term investment.
How Much Should I Invest in Tesco?
How much you can invest in Tesco depends on the size of your disposable income, investing experience, age, investment time frame, and your broker’s minimum deposit requirement. However, the general rule of thumb is to invest only what you can afford to lose. Most experts advise that you invest 2% or less of your investment capital in one stock.
How to Buy Shares in Tesco Stock?
Shares of any publicly traded company can be bought either through a stockbroker or directly from the company in what is known as a direct stock purchase plan (DSPP). Unfortunately, Tesco does not have a DSPP in place at the time of writing. So, you can only buy Tesco shares through a stockbroker.
Buy Tesco Shares through a Broker
The process of buying shares through a broker is as follows:
Log into your trading account and search for Tesco using the appropriate ticker (TSCO.L). When you click on the stock, the relevant information will be displayed on your screen, and you can place your buy order, which can be a market order or limit order. Your order is sent to the floor of the stock exchange for execution and will then be shown on your broker’s online dashboard.
Frequently Asked Questions
The company is innovative and has a culture of rewarding investors. Moreover, the stock is trading at a fair value as of June 2021.
Yes, the company reports huge profits every year. However, profit growth has been stagnant. For example, while the company reported a profit of £2.5 bln in the 2021 FY, it was slightly lower than the £2.6 bln reported in the preceding year.
Tesco has been paying dividends to its shareholders. The company paid a special dividend of 50.93p per share in February 2021 and has declared another 5.95p per share to be paid in July 2021.
Yes, it is necessary. Fundamental analysis only tells you whether the company is in good financial health. You need technical analysis to know the right time to buy the stock.
Invest with only an amount you can afford to lose and do not commit more than 2% of your investment capital in one trade. Another way is to always place a stop-loss order to limit your losses to the amount you intended to risk.
Tesco stock is primarily listed on the London Stock Exchange. The stock is also traded on the Frankfurt Stock Exchange and the Xetra marketplace in Germany.